eBay Earnings: What to Expect From Its 2-Pronged Growth Attack

eBay (NASDAQ: EBAY  ) will release its quarterly report on Wednesday, and investors haven't been happy with the roller-coaster ride that the stock has taken them on over the past year, especially since it hasn't led to any lasting results. Yet as much as longtime shareholders have focused on the growth potential of PayPal and its challenge to mobile-payment players that range from traditional credit card networks to Square, Groupon (NASDAQ: GRPN  ) , and other payment upstarts, eBay's auction and marketplace website has reemerged as a key component of growth for the online giant and could continue to play an even larger role in the company's overall future in challenging Amazon.com's (NASDAQ: AMZN  ) online-retail dominance.

eBay has come a long way since its beginnings as an online-auction website. Although auctions still play a vital component in its business, many of eBay's users count on Buy-It-Now listings that allow immediate purchases rather than participating in auctions. Moreover, PayPal has gone well beyond its initial role in facilitating eBay-centered transactions, with many users having little or no connection to eBay's online-retail offerings. As Amazon has moved to embrace outside third-party sellers, it has come more directly into conflict with eBay's business model. 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 report.


Source: Steven Arnold, Wikimedia Commons.

Stats on eBay

Analyst EPS Estimate

$0.80

Change From Year-Ago EPS

14.3%

Revenue Estimate

$4.55 billion

Change From Year-Ago Revenue

14%

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Can eBay earnings keep climbing?
In recent months, analysts have gotten a lot little optimistic about eBay earnings, cutting fourth-quarter estimates by a penny per share and full-year 2014 projections by double that amount. The stock also hasn't gone anywhere, falling 1% since mid-October.

eBay's third-quarter earnings didn't give the online company the start it would have liked to see to the quarter. Revenue grew 14%, boosting net income by 17% and helping to produce a modest beat on the bottom line. Mobile commerce as a big growth engine, rising 75%, and PayPal's revenue growth of 19% came from a 25% jump in payment volume and a 5-million user jump to 137 million active users. But a cautious forecast for the holiday season, with revenue guidance that was below what investors had expected to see, send shares falling sharply after the report.

One concern about eBay's strength comes from the fear that competition from Square, Groupon, and other companies is threatening PayPal's margins. During the third quarter, PayPal's take rate fell by nearly a quarter percentage point to 3.7%. Yet the company points to the lower rates it offers high-volume users as a major cause for the decline, and if that points to greater use of the service, it represents a win for eBay.

Moreover, even though eBay has seen fairly impressive growth from its marketplace segment, Amazon and Latin America's MercadoLibre (NASDAQ: MELI  ) have seen much more faster growth figures. The move that eBay has made away from auctions toward fixed-price sales is encouraging, as more than 70% of eBay sales come from fixed-price offerings that facilitate faster turns for eBay's seller-partners. Yet Amazon's ability to provide its Prime service and its fairly uniform customer experience stands in contrast to eBay's more hands-off approach, forcing users to deal directly with sellers while using eBay's dispute resolution services as a last resort in cases of disagreements.

But eBay is striving to make itself a bigger force in both industries. Its acquisition of global online- and mobile-payment platform Braintree should help PayPal become a better player in the mobile-payment space. Meanwhile, eBay's Shopping.com website hopes to challenge Amazon with comparison-shopping services, and with the eBay Now service expected to offer same-day delivery, eBay wants to get in on the perceived advantage of Amazon Prime. Mobile applications could also help eBay become a bigger force in the rising mobile-commerce area.

In the eBay earnings report, watch to see where the company's growth comes from and whether the stock can break out of its long funk. With more-balanced growth from both of its divisions, eBay could finally move higher and reward shareholders for their patience.

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Read/Post Comments (10) | Recommend This Article (4)

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  • Report this Comment On January 20, 2014, at 8:24 PM, TYPEONEGATIVE wrote:

    EBAY IS DEAD!.

    They've been padding their stats with free listings, something they used to do once per year, now they do it twice per month.

    They have increased fees on the same sad sack sellers, instead of increasing users or more sales, they just take a bigger percentage.

    It's over. Go to the ebay forums, people go a week without a sale, not 1 thing sold.

    The only thing on ebay now are big box sellers, with horrible seller ratings, see Best Buy and Toys R Us, and Chinese sellers selling 99 cent items with free shipping.

    It's cooked

  • Report this Comment On January 21, 2014, at 9:04 AM, PhilipCohen wrote:

    And what does the "smart money" on Wall Street think about eBay? Well, in August 2007, when the "Pain From Bain", Johnny Ho, was already effectively in control of eBay, the share prices of both eBay and Amazon were ~$40; today, eBay is ~$53; Amazon is ~$400. Clearly, Wall Street considers eBay to be a "dog", and Johnny Ho to be a very poor dog handler ... Now, seriously, what more can be said, other than ...

    eBay / PayPal / Donahoe: Dead Men Walking ...

    One also has to wonder if Pierre Omidyar has ever thought about just how much more fabulously wealthy he would now have been had he, before Johnny Ho took control, traded his eBay stock in for Amazon stock, or had he indeed not ok'd the handing over of the control of eBay to this delusional, destructive, incompetent, unscrupulous, narcissistic sociopath?

  • Report this Comment On January 21, 2014, at 1:46 PM, FiftyCaliber wrote:

    Ebay has degenerated into the most outrageously corrupt corporation on the planet. Ebay is a criminal enterprise built around ripping people off. The whole sorry enterprise and the people running it should be prosecuted under the RICO laws. Few people realize how far this company has fallen from the days it was a great place to buy and sell something to now where it's a toxic buying / selling environment. If you have stock in this crooked company, you should get rid of it now. Ebay is going to collapse under the weight of corruptness.

  • Report this Comment On January 21, 2014, at 5:13 PM, PhilipCohen wrote:

    Shill bidding fraud by professional sellers on eBay "nominal-start" auctions is demonstrably endemic; bidders who bid early and often on such auctions will most likely be sellers' shills, and eBay Inc. is - also demonstrably - the greatest knowing and calculated facilitator of such massive fraud on consumers that the world is ever likely to know and, doubtless, there will be a trickle down effect of like criminal activity to other eBay operations ...

    The ugly reality of eBay Inc.:

    eBay's crooked auctions marketplace ... bit(DOT)ly/11F2eas

    eBay Motors: Auction Fraud Galore ... bit(DOT)ly/I2gTEU

    eBay's clunky, unscrupulous "PreyPal" ... bit(DOT)ly/UVXx53

    The ongoing joke of it all ... bit(DOT)ly/YvxFEg

    Fun quotes from the eBay executive suite ... bit(DOT)ly/12xvzyAyA

    The only thing that surprises me about this utterly unscrupulous corporation is that it has not yet summoned up the gall to further obscure the endemic shill bidding fraud by converting its auctions wholly to its devious, seller-selected, "private listing" format, or by changing bidding IDs to "Bidder 1", "Bidder 2", "Bidder 3", etc, as they initially were going to do/did when Donahoe first introduced the additional layer of anonymity for (shill) bidders in 2008, nor - surprisingly - have they yet ceased to publish the details of "completed" listings, a post-sale analysis of which, with some effort, can clearly demonstrate this endemic fraud and eBay's calculated facilitation thereof ...

  • Report this Comment On January 21, 2014, at 9:08 PM, dondi wrote:

    ebay's problem is a TRUST issue. The sellers were held too a Extortion process by the buyers, put in place by Donahue. Buyers do and say whatever they want to rob sellers! eBay allows the buyers to rob the sellers. A world of evil buyers, using every dirty trick that eBay put in place and allow in the sellers rules & regulations. Buyers swing sledge hammers, sellers marshmellows! As a result the listings for good expensive items in the used Antique Collectible catergories have been decreasing exponentially. Sellers protected themselves by 'Buy it Now", catergories, somewhat and as a result Items are not selling! I have at least 20 eBay shark seller friends who all say the same thing, no sales, slower than death sales figures and it was christmas. Unfortunately i love ebay and it saddens me to see ebay collapsing into a evil website, where no sale are ever final, even if GOD wrote the ad, the devil is the buyer....... Amen

  • Report this Comment On January 22, 2014, at 2:47 PM, NetAnaylyst wrote:

    Yes, ebay is beginning to unravel, and there's a social media bakclash against it with FB groups popping up consisting of former ebay sellers.

  • Report this Comment On January 22, 2014, at 3:29 PM, bugmenot wrote:

    Why are disgruntled ebay members commenting on a finance blog? Investors would be wise to disregard such unqualified noise.

  • Report this Comment On January 22, 2014, at 7:38 PM, PhilipCohen wrote:

    "Why are disgruntled ebay members commenting on a finance blog?"

    Because eBay is creating more and more disgruntled members, and eBay shareholders are entitled to know what is going on at eBay other than the constant stream on nonsense that spews from the eBay Dept of Spin ,,,

    Regardless, eBay Inc. is - demonstrably - the greatest knowing and calculated facilitator of auction fraud on consumers that the world is ever likely to know and, doubtless, there will be a trickle down effect of like criminal activity to other eBay operations ...

    eBay shareholders are entitled to know this. Now, back to your eBay cubicle, shill ...

  • Report this Comment On January 23, 2014, at 2:16 AM, PhilipCohen wrote:

    Johnny Ho Inflates eBay Stock with Hot Air from Disclosure of Proposal from Carl Icahn

    “Proposal from Carl Icahn — The company also announced today that it has received a notice from Carl Icahn indicating that he has nominated two of his employees to its Board of Directors and submitted a non-binding proposal for a spinoff of its PayPal business into a separate company. The notice stated that companies controlled by Mr. Icahn had, earlier this month, acquired shares and derivative securities that give him an economic interest of approximately 0.82% in the company. …”

    What a total non story this is! Still, the Ho had to figure out some way to get some hot air into the moribund eBay stock. Separately corporatize “PreyPal”? Why not? Because effectively, as the Ho well knows, without eBay, “PreyPal” is finished, and without “PreyPal”, eBay is finished …

    The ugly reality of eBay's clunky, unscrupulous "PreyPal" operation ... bit(DOT)ly/UVXx53

    And then there is the massive, demonstrable, eBay-facilitated criminal activity on the eBay auctions marketplace …

    The ugly reality of eBay eBay's crooked auctions marketplace ... bit(DOT)ly/11F2eas

    The ugly reality of eBay Motors (UK sample): Auction Fraud Galore ... http://bit(DOT)ly/I2gTEU

    The fact remains that if, in August 2007, before Johnny Ho started his active demolition work and when both eBay and Amazon stock was ~$40/share, had any major “long” eBay shareholders instead put their funds into Amazon stock, they would now be ~8x wealthier! Clearly, any Icahn investment/proposal does not alter the reality that the truly “smart money” on Wall Street knows that eBay is a “dog” and that Johnny Ho is a very poor dog handler—otherwise, like Amazon, eBay too would be valued at $400/share …

    That the “Headless Ho” could give a tutorial to anyone about anything, particularly on technology, is simply too funny; still, it would appear that Johnny Ho and Carl Icahn could be a good fit … both looking after themselves …

    "Even though people think I'm an expert at technological innovation, my own instinct for technology was frozen in place in 1982." - John Donahoe (26 Sep 2007) ...

    [On the first part, who could possibly think that? On the second, a few of the only true words that Johnny Ho has ever spoken ...]

    eBay / PayPal / Donahoe: Dead Men Walking ...

  • Report this Comment On January 23, 2014, at 9:09 AM, bugmenot wrote:

    How many shares do you own, Philip Cohen? Did you see the after hours performance? How does that make you feel?

    How many times are you going to post the same tired spam?

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