Not surprisingly, fantastic growth continued during the fourth quarter at Best Ideas Newsletter holding eBay (EBAY). Revenue surged 18% year-over-year to $4 billion, a touch better than consensus expectations. Earnings per share, on a non-GAAP basis, grew 17% compared to a year ago to $0.70.
The continued resurgence of the core eBay business continued uninterrupted, as revenue surged 16% year-over-year to $2 billion, which coincided with 16% gross merchandise volume growth ($19.1 billion). While PayPal grabs all the headlines, the performance of eBay's marketplace has been fantastic over the last several quarters. The eBay marketplace, in our view, has reached a similar positioning as Amazon (AMZN) - a testament to how much the site has evolved. The growth of fixed payments, power sellers, and the need for people to generate extra income has certainly been a factor in the growth, but it seems that mobile is having a better-than-anticipated impact on the business. Not only does the mobile application allow consumers to comparison shop, but we think it also spurs spontaneous bidding - a surprisingly effective revenue driver.
CEO John Donahue provided some interesting commentary on mobile:
Mobile is bringing new users to eBay and delivering strong growth. For 2012, mobile attracted over 4.3 million new users to eBay and generated $13 billion in mobile commerce volume. That's well over twice our volume from the previous year and well ahead of our original $10 billion forecast for the year.
PayPal growth was spectacular, as we've come to expect during the past few years. Revenue surged 24% year-over-year, to $1.5 billion, on 24% total payment volume growth that represented over $41 billion in transactions. PayPal's network effect seems to be strengthening, as account openings accelerated during the fourth quarter to the fastest pace in years. PayPal's partnership with Discover (DFS) is set to launch in the second quarter of 2013, and we think payments growth could experience a nice boost from physical acceptance. With innovations like pre-ordering that will allow consumers to skip lines, we can see this partnership being highly successful.
While competition from PayPal continues to mount with services like V.me from Visa (V), as well as Square, we think the growth of the broader electronic payments market will allow PayPal to endure its current growth trajectory.
Looking ahead, eBay offered in-line guidance for the first quarter of $0.60-$0.62 in earnings on $3.65-$3.75 billion in revenue. We're not worried that guidance didn't come in ahead of consensus, as we think management is being conservative to temper expectations. 2013 guidance was also in-line with consensus as the company expects revenue of $16-$16.5 billion driving earnings per share of $2.70-$2.75.
Overall, we like what 2013 has in store for the firm. Payments growth should remain robust, and the resurgence of the eBay marketplace is a trend we think will prevail.
Additional disclosure: EBAY and V are included in our Best Ideas portfolio.