eBay's Earnings a Successful Bid for Market Leadership

Technology was in the spotlight again on Wednesday. The Nasdaq was the pace-setter in trading all day as a couple heavyweights were set to report earnings. Online Auction pioneer eBay (EBAY) and electronics darling Apple (AAPL) continued a slew of positive earnings reports cementing tech's leadership role in the road to market recovery.
The auction business for eBay had been stumbling for quite sometime, in fact even before the recession, so Wednesday's quarterly report may just be what is needed to turn the corner here. eBay, is trying to rein in its businesses and truly become the global auctioneer. This was most evident of late as management outlined a plan to take its Skype Internet Phone product and churn out an IPO next year, separating the unit after years of failed synergies. eBay also bought a controlling stake in Gmarket, a South Korean online auction house. Best way to break into new markets? Why, buy local of course!

These recent announcements meant eBay's dragging share price was finally finding some life, rising 22% over the last month, including 3% Wednesday before their numbers. Investors had more to smile about as eBay delivered a solid report, sending shares higher by 5% in after-hours trading.

Highlights from eBay included earnings of $357Million ($0.28/share) based on GAAP. Non-GAAP numbers, the numbers that analysts were looking at, included profits of $500Million ($0.39/share). Expectations were beat by 5 cents a share and eBay also generated free cash flow of $577Million from its quarterly $2.02Billion in Revenues. These totals point to overall revenue declines of 8% and profit declines of 11%. Analysts however, certainly feared for worse. eBay guiding within expected ranges also helped its cause in after-market trading.

So where does eBay's growth and strength come from? PayPal, classifieds and Skype were the main drivers of Revenue year-over-year to the upside, so the main auction businesses still remain mostly catatonic. But with eBay looking to expand its online presence, investors are likely to chalk this one up to the economy. Auction-related business fell 18%, while Skype and Payments (PayPal etc.) growth on a revenue basis was 21% and 11%, respectively.

Granted the online auction slide doesn't look all that fantastic, but with economic recovery, the expectation is that this business can pick up again. With eBay looking to expand into more markets, the additional global reach of the brand will certainly broaden the revenue stream. With its collection of shopping and auction websites, including Shopping.com and Stubhub.com et al, eBay finds its reach expanding into specific niche businesses making it that much tougher for any start up or smaller competitor. Ebay has also ramped up its online classifieds business, and that grew 23% year over year. Taking all these together, CEO John Donahoe's vision and three-year growth targets look that much more likely.

Given eBay's recent run-up, it is intriguing but not ideal to jump into the company stock tomorrow. However, these numbers and the guidance that came with them confirms that eBay is very much ticking and should be watched.

Disclosure: Author holds no position in EBAY

Comments

[Leftfield:]

Donohoe's excuse for changing Ebay was because auction results were "only" growing in the low double digits. In one of the dumbest moves of all time, he socked it to small sellers and greedily sucks up what he can off the rest, giving large mass-merchandisers loss-leader deals and even nonpaying buyers 100% positive feedback. In an economy where Ebay could have provided a forum and lifeline for seekers and sellers of bargains.

Most of the sellers who have left Ebay are among the best who had the option, reluctantly, to make the effort and take the risk to move elsewhere.

There is NO EXCUSE for down results for Ebay in this economy. Low-price providers are all up: Walmart, Costco, Family Dollar, Amazon. Ebay would lead the pack if not for the CEO who is becoming a legendary failure, Donohoe.

Apr 23 05:29 PM

[Trader Tom:]

Amazon Revenues Are Up. That means eBay cannot use the economy as an excuse any more.

Donahoe should be replaced. eBay needs the SELLERS much more that it needs Donahoe.

Tom

Apr 23 05:50 PM

[leapingcat:]

On Apr 23 01:29 PM eBay +++ wrote:

>. How could you be a
> Seller and not love Paypal unless you are a fraudulent Seller?

Perhaps you would like your buyers to be able to pay by other means?

Apr 23 05:55 PM

[Bob C:]

Tonight's Headlines:
"Amazon's Profit Jumps 24%, Resisting Recession"

Isn't it funny that all of the eBay cheerleaders have fallen silent since Amazon's uptick shows that it is Not the economy pulling down FeeBay!!

Apr 23 07:50 PM

[Et tu, Brute!:]

Another clueless, disconnected reporter. I guess unless a stock reporter actually monitors daily a specific stock company and follows what is going on there, they just jump in at the deep end and pray they can swim long enough!

But, hey, even Wall Street got it months ago!

John Donahoe and crew have been ruthlessly trying to grind into smithareens the auction business side of ebay. So calling it an auctioneer site, is 1) laughable; and 2) what JD has been saying he wants to be rid from ebay. Until the last, what is it guys, 7 days?

Chris Krasowski, didn't you KNOW this?

Apr 23 09:47 PM

[eBay +++:]

Bob C, eBay core GMV was 10.8B the Amazon equivalent Revenue was 4.9B. Amazon is not in the same league. Don't you meatball ex-Sellers comprehend that? Sure Amazon has more room for growth, but it's a huge assumption to assume they will pass eBay...


On Apr 23 07:50 PM Bob C wrote:

> Tonight's Headlines:
> "Amazon's Profit Jumps 24%, Resisting Recession"
>
> Isn't it funny that all of the eBay cheerleaders have fallen silent
> since Amazon's uptick shows that it is Not the economy pulling down
> FeeBay!!

Apr 23 09:54 PM

[Patricia013:]

@ebay++++

""x_powerseller are you as dumb as Patricia?""

....and a statement like that makes you....smart? Since when do people with opinions get bashed and called dumb on this site???? Your post should be removed and you banned!

All hail Amazon's amazing 24 percent gain - a company with good, solid experienced businesspeople running it.

Apr 24 02:06 AM

[Patricia013:]

....and to top it all off - the very "wise" Mr. Donahoe proclaimed a 15 cent listing day for auctions on April 21! Why, Mr. Donahoe, you sure don't mind the flea market atmosphere or the noise when Ebay is in need of ready cash. You know where to go....to auctions!!!!! This hapless man doesn't know WHAT he wants! Face it - he has no REAL business model and trying to keep track of Ebay's present day business model is like trying to find your way out of a maze...one day they want to be the world's largest retailer - the next day they want to liquidate large lots - first they claim auctions are dead and they don't want a flea market atmosphere and then they hold a 15 cent listing day for auction asking sellers to clean out their basements and attics! Come on now...this is as stupid as dirt! The only thing that tops it is a board of directors putting a multi-billion dollar healthy company into the hands of the present management team who have driven the business practically to its knees!

Come on now all you Ebay cheerleaders - line up and dutifully take a shot at what amounts to the blatant truth!

Apr 24 02:19 AM

[Patricia013:]

@ ebay+++ calling me dumb is ignorant and an unpolished way to act! I can't print here what I think YOU are!

Apr 24 12:22 PM

[Patricia013:]

@ ebay+++ even if I gave you the 8 percent....there is still a 10 percent decline....FOOL!

Apr 24 02:44 PM

[Tony P.:]

"Bob C, eBay core GMV was 10.8B the Amazon equivalent Revenue was 4.9B. Amazon is not in the same league." ebay = -----

Yep, Amazon isn't in the same league as ebay. Of that $4.9B, Amazon actually stocked, managed, sold and shipped approx. 70% of it. And they had a part in stocking and shipping some of the remaining 30%.

eBPay, on the other hand, had no contact *WHATSOEVER* with any of the $10.8B of items that OTHER people sold on their site. Good thing, for the buyers. Gawd knows what they would have received. Empty promises, most likely.

That's all they're good at delivering - Empty Promises. BTW - got your dividend check from them yet? Give 'em a few more days; they just mailed it out last week.


As a side note.. ebay announces a second, straight quarter of losses and the stock price goes UP.. it's plain to see why we're in this economic mess we're in, but for the life of me, I'd have thought we'd have learned a thing or two by now. The algae layer must be a foot thick on the gene pool, by now. Every day I expect to hear of people simply driving their cars into the ocean, smiling and waving as they plunge downward, not a thought (!) nor care in their sheeple, little minds. Ah, sweet ignorance.. 'tis a blessing. Ain't that right, ebayplus?

Apr 24 03:10 PM

[Patricia013:]

@ebay++++ calling you a FOOL was MY opinion but although I have reported your post the powers-that-be sought fit to only delete my post. Are you on their payroll?

Apr 24 03:20 PM

[Tony P.:]

Evidently, not everyone is fooled. ;-)

www.fool.com/investing...


"Investors falsely believe that names like Dell or eBay (Nasdaq: EBAY) will see their relative valuations return to their headier days. They won’t.

Why? Captain Obvious would say that growth has slowed, technology evolved, and competition emerged. But all that misses the real reason. Instead of returning incremental profits to shareholders via dividends, such companies wreck shareholder value by chasing growth through overexpansion and high-profile acquisitions. Oh, and the ill-timed share repurchases that exist primarily to juice per-share earnings and help sop up all that stock option-driven dilution."


The investor nazi says, No dividend for you!

Apr 24 03:34 PM

[Bob C:]

"So yes, I think your Dumb. Bob C has called me worse, you'll live."
posted by eBay+++

Well first off, it is you're, not "your" :)
And second, dig through all of my posts (I did, just in case my old brain forgot) and find one time that I called you (eBay+++) anything!

One of your (not you're) posts stated:
"At least Bob C is rational."
Thank you! It brought a smile!

Apr 24 06:04 PM

[eBay +++:]

Bob C, my apologizes. I don't think you did directly call me anything on 2nd thought. I could honestly care less about my grammar or anyone else, waste of time to correct. If I get your point and it makes senses who cares it's a blog.

Patricia, I'm so glad to see the Admin here agrees with me. That really is funny.

Apr 24 06:44 PM

[Patricia013:]

"and find one time that I called you (eBay+++) anything!"

@ Bob C - you don't have to this ebay clone makes it up as he goes along! Now THAT"S pretty DUMB! LOL So...its good that he doesn't care....how he looks to others.

Apr 25 01:25 AM

[Et tu, Brute!:]

On Apr 23 01:29 PM eBay +++ wrote:

>. How could you be a
> Seller and not love Paypal unless you are a fraudulent Seller?

----------------------...

This has to be one of THE MOST asinine statements ever made!

Apr 25 01:53 AM

[Patricia013:]

I think I've heard enough from ebay flunkies. I speak from 10 plus years of experience in the trenches on a daily basis as an Ebay seller. Like it or not I hang it out for all to see - and they should see and be aware of where Ebay is heading. Don't try to gloss over the truth...its useless!

You can bash me all you want...doesn't change a thing!

Apr 25 12:45 PM

[Bob C:]

Hey Patricia,

Where did some of you know who's posts go? LOL
With a -163 comment rating, eBay would have kicked him/her off long ago :)

Apr 26 01:58 PM

[Patricia013:]

Bob C - good for seekingalpha! Doesn't make sense to have someone here who bashes posters directly simply because of a different opinion - that doesn't solve anything.

Apr 26 05:12 PM