Will eBay Keep Bidding Its Earnings Higher?

On Wednesday, eBay (NASDAQ: EBAY  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise.

The eBay name is synonymous with online auctions, but that portion of its business has increasingly declined in importance compared to its PayPal division. With big innovations in the electronic payment industry, eBay is having to keep up with the fast pace of change to protect PayPal's strong position. Let's take an early look at what's been happening with eBay over the past quarter and what we're likely to see in its upcoming report.

Stats on eBay

Analyst EPS Estimate

$0.62

Change From Year-Ago EPS

12.7%

Revenue Estimate

$3.77 billion

Change From Year-Ago Revenue

14.9%

Earnings Beats in Past 4 Quarters

4

Source: Yahoo! Finance.

Will eBay's earnings keep rising this quarter?
Analysts have generally kept their views on eBay's earnings stable in recent months, cutting their estimates for the just-ended quarter by $0.01 per share but boosting their full-year 2013 call by the same amount. The stock, meanwhile, has seen reasonable gains of almost 9% since early January.

eBay has evolved well beyond its original auction format to become a dominant online marketplace for goods of all sorts. With much of its volume coming from Buy It Now direct sales, eBay competes more with Amazon.com (NASDAQ: AMZN  ) and its own third-party merchant network than with other auction sites. Amazon gets nearly 40% of its sales from third-party sellers, so the niche is an important one, and eBay has sought to distinguish itself by noting that unlike Amazon, it isn't in direct competition with its sellers. eBay has also started to extend small-business loans through PayPal to encourage high-volume sellers to do business on the site.

But the real key to eBay's success is PayPal, the current leader in online payments. A new partnership with Discover Financial (NYSE: DFS  ) should help PayPal realize part of its growth potential, as Discover hopes to use the association with PayPal as a selling point for its less-prominent card network. The move will also help PayPal keep up with competition from privately held Square and other competitors, as well as opening up a whole new way for Discover cardholders to consider using online payments as part of their overall spending strategy.

Meanwhile, eBay remains smart about making the most of its business. It recently announced it would raise its final value fee on casual sellers from 9% to 10%, while also increasing rates for eBay Stores subscribers in some cases.

In eBay's quarterly report, be sure to pay attention to what Fool contributor Tim Beyers identified as the key figures for the company's success: the number of payment transactions it processed and active PayPal accounts it has on the books. Those will be the keys to the company's overall growth both now and in the immediate future.

Even eBay understands how big a threat Amazon is, but can Amazon keep investors happy? The Motley Fool's premium report will tell you what's driving Amazon's growth, and fill you in on reasons to buy and reasons to sell Amazon's stock. The report also has you covered with a full year of free analyst updates to keep you informed as the company's story changes, so click here now to read more.

Click here to add eBay to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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  • Report this Comment On April 15, 2013, at 6:22 PM, kettleoffish wrote:

    E-bay for what it is, is the only place with millions of viewers , that you can safely sell your item. Unfortunately , for most of us, the fees they charge(10%) final listing fees plus they charge a fee on the final listing on shipping the item , is way too high for the average seller. Unless you sell in huge volume , you wont make any money on this site. You are not going to strike it rich here. Just barely get by. Unless the re-vamp their selling fees, they are going to lose more customers, who will go to the outside (flea markets, (news ads(, etc. to sell their items.

  • Report this Comment On April 16, 2013, at 12:34 AM, PhilipCohen wrote:

    If you read the reader comments about eBay on any article that has comments enabled you should understand that the eBay Marketplace is in fact continuing to atrophy: the sell though rates are abysmal, notwithstanding eBay’s disingenuous efforts to obfuscate same.

    As far as PayPal is concerned, it’s not the MasterCard “fee” that will cause PayPal any real pain, it is MasterCard’s “MasterPass”, the professional online/POS payments gateway/app that is going to put PreyPal back into its eBay coffin … http://bit.ly/UVXx53

    Regardless, look out for the smoke and mirrors on Wednesday evening …

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