Why eBay's Shares Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of online auction expert eBay (Nasdaq: EBAY  ) were getting seriously bid up by investors today, as they gained as much as 17% in intraday trading.

So what: Strong first-quarter results and an optimistic outlook fueled the big gains for eBay today. For the quarter, the auctioneer posted $0.55 in per-share profit on $3.3 billion in revenue. Profit per share was up 17% from a year ago, while revenue climbed 29%. Both the top and bottom lines exceeded Wall Street's estimates, which called for $0.52 in earnings per share on $3.15 billion in sales.

What may be even more exciting for investors, however, was the fact that eBay provided a full-year outlook that called for $2.30-$2.35 in earnings per share. Current analyst estimates were looking for EPS of just $2.30 for the year.

Now what: The investment community had been concerned that eBay's business had stalled out, but recent results make that look less likely. Many are even calling this a "turnaround." But is it a turnaround that investors should be betting on? Shares aren't dirt cheap, but there's a lot to like about eBay -- its business has produced very attractive returns and it's sitting on a strong balance sheet. On the other hand, the company historically has been acquisition-happy, which doesn't always end well. It's also up against some particularly tough competition from online retail giant Amazon.com (Nasdaq: AMZN  ) .

That said, eBay shareholders have good reason to be celebrating today. And if the company keeps up what it showed in the first quarter, the future could look very bright.

Want to keep up to date on eBay? Add it to your watchlist.

The Motley Fool owns shares of Amazon.com. Motley Fool newsletter services have recommended buying shares of eBay and Amazon.com. Motley Fool newsletter services have recommended writing puts on eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


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