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EBAY INC (EBAY)

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EBay Profit Up as Core Business Keeps Growing

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10/18/2012 | 01:22am CEST

(Adds CEO comments, details and share activity.)

 
   By John Letzing and Ben Fox Rubin 
 

EBay Inc. (>> eBay Inc) said its quarterly profit rose sharply as its core online retail business continued to demonstrate a revival.

EBay, of San Jose, Calif., said Wednesday its third-quarter profit rose 22% thanks to growth at its PayPal payments business and an ongoing refresh of its online retail, or marketplaces, segment.

The company also lifted its outlook for earnings in the full year, due in part to upbeat expectations for the coming holiday shopping period and the ongoing revamp of marketplaces--which has included a redesign of eBay's site, a new logo and more of a focus on selling new goods as opposed to auctioning items.

"We don't use the word turnaround anymore," said eBay Chief Executive John Donahoe, who tapped a baseball analogy to describe the core business's progress: "We're out of the regular season, and into the playoffs."

Still, investors reacted coolly to eBay's report, bidding its shares down slightly after hours to $48.

While its revenue-growth rate has trailed that of rival Amazon.com Inc. (>> Amazon.com, Inc.), eBay has sought to distinguish itself from its peer as more of a partner to established retailers, rather than a potential rival.

EBay has also been able to rely on strong growth from PayPal, which remains on track to become its largest segment.

The company said Wednesday revenue at the payments segment that includes PayPal rose 23% in the quarter to $1.37 billion.

Still, eBay also disclosed that it is planning a "streamlining" for the unit, which Mr. Donahoe said has become ungainly as it has expanded into areas like mobile and checkout payments at traditional, brick and mortar retailers.

Now, Mr. Donahoe said, PayPal's nine different product groups will be winnowed to one. The CEO stressed that the move is unrelated to margins at PayPal, which are growing and remain healthy, he said.

EBay's marketplaces unit reported 9.3% revenue growth to $1.81 billion in the quarter. Gross merchandise volume, which is the total value of goods sold on the website, rose 11%, excluding vehicle sales.

BGC Partners analyst Colin Gillis noted that eBay's growth in gross merchandise volume in the U.S., at 16%, compared favorably to overall e-commerce growth rates during the period, adding: "This is the quarter I expected."

"EBay has some great things going on," Mr. Gillis said, though he suggested that many disappointed investors were likely expecting eBay to handily top Wall Street estimates.

The analyst also pointed to roughly 59% growth for eBay's stock price in the year to date. "Will it pull back?" he asked of eBay's stock price following the earnings report Wednesday. "Yeah, probably."

Overall, eBay reported a third-quarter profit of $597 million, or 45 cents a share, up from $491 million, or 37 cents a share, a year earlier.

Excluding stock-based compensation and other items, per-share earnings rose to 55 cents from 48 cents. Net revenue grew 15% to $3.4 billion. Analysts polled by Thomson Reuters had expected earnings excluding items of 54 cents a share, and about $3.4 billion in revenue.

Gross margin widened to 70% from 69%, eBay said.

For the full year, eBay says it now expects earnings between $2.32 and $2.35 a share, and revenue between $13.95 billion and $14.1 billion. The company had previously forecast between $2.28 and $2.33 per share in earnings, and between $13.8 billion and $14.1 billion in revenue.

Mr. Donahoe said he is "cautiously optimistic" that the company will see a strong holiday shopping season in the U.S., though lingering economic uncertainty in Europe may blunt any ultimate benefit.

Write to Ben Fox Rubin at ben.rubin@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

Stocks mentioned in the article : eBay Inc, Amazon.com, Inc.
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Financials ($)
Sales 2016 8 944 M
EBIT 2016 2 794 M
Net income 2016 1 872 M
Finance 2016 2 554 M
Yield 2016 -
P/E ratio 2016 18,57
P/E ratio 2017 16,79
EV / Sales 2016 3,59x
EV / Sales 2017 3,41x
Capitalization 34 638 M
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Mean consensus OUTPERFORM
Number of Analysts 38
Average target price 31,0 $
Spread / Average Target 1,0%
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Managers
NameTitle
Devin N. Wenig President, Chief Executive Officer & Director
Thomas J. Tierney Non-Executive Chairman
Wendy Jones Vice President-Global Operations
Scott Schenkel Chief Financial Officer & Senior Vice President
Stephen Fisher Chief Technology Officer & Senior Vice President
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