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eBay (NASDAQ:EBAY) is scheduled to report its fourth quarter 2009 results after the market closes on Wednesday, January 20, 2010. Based on our analysis, we at are expecting EBAY to report slightly stronger than expected quarterly results that exceed Wall Street’s consensus expectations.
Analyst Expectations
We are forecasting revenues of $2.30 billion and EPS of $.41. This would represent a 13% increase in revenues from last year’s $2.04 billion in the same period. The current analyst consensus estimates calls for revenues of $2.28 billion and EPS of $.40. On October 21, the company issued fourth quarter revenue guidance of $2.20 - $2.30 billion and $.38 - $.40 non-GAAP EPS.
Earnings Analysis
eBay stands to benefit from stronger than expected e-commerce spending during the key fourth quarter holiday season. comScore reported earlier this month that $29.1 billion was spent on online purchases this holiday season – marking a 4% increase over 2008. Data from Compete shows that traffic to jumped 9% in the fourth quarter. While eBay’s traffic growth pales in comparison to Amazon’s (NASDAQ:AMZN) 22% jump, it still shows marked improvement from the fourth quarter of 2008 when traffic volumes fell.
While an improving economic environment is certainly a positive for eBay, investors have to be concerned about eBay’s competitive positioning versus Amazon. JP Morgan analyst Imran Kahn noted in a recent research report that eBay’s PowerSellers are continuing to shift away from eBay to a multi-channel retail strategy. JP Morgan’s survey of these PowerSellers showed that only 56% of their total sales came from eBay in 2009 – down from 65% in 2008. These merchants are finding that Amazon can be a more successful marketplace for them than eBay.
Stock Performance
eBay’s stock price jumped nearly 69% in 2009 and easily outperformed the 19% increase in the Dow Jones industrial average. However, eBay shares have been sliding ahead of earnings as investors worry over the company’s outlook for 2010.
eBay stock is now trading at 14x consensus 2010 EPS estimates. This is a discount to the relative valuations of its peer group. Despite eBay’s worrisome competitive positioning, the stock’s valuation is still attractive and Wall Street expects earnings to grow in 2010.
Recommendation: Buy with a $30 price target

Disclosure: No Positions
Source: eBay Earnings Preview Q4 09: Attractive Despite Competitive Positioning