eBay’s Q3 Earnings: A Preview

| About: eBay Inc. (EBAY)
Previewing eBay’s (NASDAQ:EBAY) Q3 Earnings
With Q3 being here and gone, let's take a look at how I did with my Q3 forecast versus actual results.
Payments (PayPal)
Last quarter I had said that PayPal revenue should come in at 825 MM, the actual number was slightly lower at 817 MM. This quarter, I am estimating continued strong growth with 2% revenue growth from Q2, and 21% growth year over year. This is slightly below historical growth rates. This puts revenue for PayPal to come in around 833 MM. PayPal is continuing to expand in the mobile payments space, especially the Android platform. PayPal is also increasing partnerships with other companies such as “Bling Nation.” I believe these initiatives will ultimately improve PayPal’s growth.
Stifel Nicolas analyst Jordan Rohan was quoted today as saying Paypal “is in the best position of any payments solutions to become the de facto currency on the Web.”
I couldn’t agree more with that assessment.
MarketPlaces (eBay)
I believe eBay will see much weaker growth in Q3, and will take a substantial hit this quarter. Last quarter I estimated revenue at 1.98 billion for MarketPlaces. I hit the bull’s-eye here for 2 quarters in a row. eBay reported 1.98 billion last quarter. I’m taking a cautious stance and forecasting revenue to come in at 1.34 billion, this implies a negative growth rate of 4% quarter over quarter and negative 1% year over year.
Communications (Skype)
I was one of the few cheerleaders for Skype when it was universally panned. Skype remains a high growing, profitable, and ubiquitous solution for VOIP. With apps on the Iphone and Android – Skype’s position only continues to grow. With talk of possible acquisitions or an IPO, eBay’s 6 billion dollar war chest would improve substantially. This makes the value proposition for eBay all the more compelling.
Currency Fluctuations
With the Fed announcing quantitative easing part 2, eBay will benefit from the weaker dollar. Expect this to boost earnings.
eBay had given 2.13 to 2.18 billion in revenue guidance from the last earnings (Q2) report. I forecast that total eBay revenue will come in at 2.17 billion with eps of 0.27 cents (GAAP) and .36 cents (non-GAAP). With eBay already pre-announcing earnings to top off near the high range…this seems about in-line.
Disclosure: Long eBay