By: Todd McDonald, Analyst
eBay (NASDAQ:EBAY) is scheduled to report 1Q2013 earnings after the closing bell on Wednesday, April 17. The numbers are typically released at 4:15 p.m. EST and will be followed by a conference call at 5:00 p.m. EST.
Outliers And Strategy
Back in January, eBay gave the following guidance for 1Q2013
- Non-GAAP Earnings Per Share (EPS) expected to be in the range of $0.60 and $0.62. The Street estimate is $0.62. eBay has beat on Non-GAAP Earnings Per Share each of the last eight quarters.
- Revenues are forecast in the range of $3.65 bln to $3.75 bln. The consensus is $3.77 bln.
- With 1Q2013 results potentially priced in, much of the focus will center on the outlook for 2Q2013.
- The current consensus for Non-GAAP EPS for the 2Q2013 period is $0.66, with a range of $0.57 to $0.68.
- The consensus for revenues in the 2Q2013 period is $3.95 bln, with a range of $3.82 bln to $4.10 bln.
- Any adjustments to the outlook for FY2013 could also have consequences for eBay shares. Back in January, eBay said it expects net revenues in the range of $16 bln to $16.5 bln and Earnings Per Share in the range of $2.70 to $2.75.
- eBay is seen posting solid results for 2Q2013, thanks to ongoing strength in the PayPal business and its expanding leadership position in mobile payments, along with a pickup in the Marketplace segment.
- eBay recently hit a 52-week high of $58.04 and is up more than 60% in the last year. eBay is now trading at 5.28x sales and 28.8x P/E, implying the bar is set high going into the release.
- Implied Volatility: Over the past eight quarters, eBay earnings have caused an average absolute move of 4.70% one day after earnings dissemination. Using options premiums, traders are expecting an absolute move of approximately 5.3%.
- 04/02: According to a post on StreetInsider.com, UBS initiated coverage on eBay with a Buy rating and a price target of $64. The firm cites a solid risk-reward, a strong Marketplaces segment, and innovation in the payments space.
- 04/01: Topeka Capital raised its price target on eBay from $54 to $65, moving its rating from Hold to Buy, according to a post on StreetInsider.com. The firm cited management's ability to meet laid out targets, which at the present time call for a doubling of the payments business in three years.
- 03/28: eBay issued a press release announcing its three-year growth plan. The company believes that by 2015, they will facilitate approximately $300 bln in commerce, up from $175 bln in 2012. The firm also expects revenues to increase over 50% by 2015.
eBay shares are up approximately 56% over the past 12 months, thanks to consistent upside earnings surprises. There continues to be solid momentum, with shares trading well above (~12%) the 200-day SMA. If earnings surprise to the upside, look for initial resistance at the most recent highs near $58, followed by the all-time highs of $59.21. If results disappoint, the first area of support is the 50-day SMA near $54.65, which also corresponds to the highs of the day from the overnight gap on 03/28. There is also further downside risk to the $53 area (Chart courtesy of StockCharts.com).
Expectations for eBay's 1Q2013 release are high, with the company well positioned to take advantage of the evolving payments space and an aggressive three-year growth plan. With the recent advance, and the steady earnings beats, any missteps can have severe consequences for eBay. Focus on the company's guidance for 2Q2013 for a confirmation signal.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.