Ah, there's nothing quite like the first few moments after a company announces earnings. Yesterday afternoon, for instance, this email landed in my inbox: "BULLETIN -- eBay warns it won't meet Q4 analyst estimates." But clicking through to the actual story revealed this headline: "eBay tops revenue estimate -- Earnings per share in line; Q4 outlook matches Street." (The media outlet later corrected the error.)
We imagine such dramatics caused more than a few heart palpitations, but not around here. Let's look at some of the important stuff from yesterday's eBay
- $530.9 million in revenue, up 84%
- $103.3 million in net income, or $0.16 per diluted share, up 69%
- $168.4 million in free cash flow, up 84%
- 85.5 million registered users, up 56%
- 37.4 million active users, up 55%
- 235 million listings, up 47%
- $5.8 billion in gross merchandise sales, up 53%
The free cash flow picture definitely warrants a closer look. My calculations show the stock is trading at about 60 times trailing-12-month FCF -- meaning its P/FCF-to-cash flow growth ratio is below 1.00. It will have to grow FCF by some 43% annually to reach its $1 billion goal by the end of 2005 -- certainly not a huge stretch considering its current growth rate.
The stock will be down this morning because management's projection of $0.98 per share in 2004 pro forma earnings is below analysts' consensus estimate of $1.05. But this company is still firing on all cylinders, and the big picture hasn't changed -- as should be apparent from reading Jeff Fischer's fine Take, eBay Nears 2005 Goals.