Please ensure Javascript is enabled for purposes of website accessibility

Will eBay Keep Bidding Its Earnings Higher?

By Dan Caplinger - Apr 15, 2013 at 6:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company's namesake auction business has taken a backseat to electronic payments.

On Wednesday, eBay (EBAY 3.71%) 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 (AMZN 4.03%) 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 (DFS 2.89%) 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.

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

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

eBay Inc. Stock Quote
eBay Inc.
EBAY
$46.47 (3.71%) $1.66
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$2,221.55 (4.03%) $86.05
Discover Financial Services Stock Quote
Discover Financial Services
DFS
$110.78 (2.89%) $3.11

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
332%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.