By Alistair Barr
January 18, 2012 9:14 PM EST
EBay Inc gave a conservative quarterly sales forecast despite unveiling better-than-expected results, warning that a weak European economy may take the gloss off rip-roaring growth in online commerce.
But CEO John Donahoe -- who is overseeing a turnaround in its core "marketplaces" division and pitting a company once synonymous with auctions against Amazon.com Inc -- remained confident about the longer-term outlook, citing robust e-commerce growth and strength in its PayPal online-payments arm.
Shares of the company gained 2.4 percent to $31.07 in after-hours trading following the earnings report.
In early 2012, a weakening euro may also dent eBay's bottom line. The recent decline of the currency against the U.S. dollar reduces the value of sales in euro zone countries when converted to greenbacks. Currency volatility also restrains cross-border transactions, a profitable source of growth for PayPal.
"They're exemplifying the bearish outlook for the currency by telling people how much the weak euro will affect their earnings in the next quarter. They want to under-promise and over-deliver," said Bill Smead of Smead Capital Management, which owns eBay shares.
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"But earnings are going to grow 15 to 20 percent a year for years, and all these little wiggles in the short run are just noise."
In the long run, EBay is riding a growth wave as more shoppers buy online and via smartphones and tablet. It benefits from this trend because Marketplaces charge fees on transactions and other activity. PayPal also takes a cut of a rising volume of electronic payments processed on its network.
The company forecast first-quarter profit of 50 cents or 51 cents a share and revenue of $3.05 billion to $3.15 billion. Analysts were expecting first-quarter earnings of 54 cents a share and revenue of $3.16 billion, according to Thomson Reuters I/B/E/S.
HEADWINDS FORECAST
The company's main marketplaces business, however, is growing roughly in line with e-commerce.
Donahoe said e-commerce has evolved into a fixed-price business and away from the online auctions that eBay pioneered in the 1990s.
EBay's fixed-price business, which accounts for about 65 percent of volume, grew 15 percent in the fourth quarter in the U.S. and bigger, top-rated sellers grew 19 percent, Donahoe noted during an interview with Reuters.
Meanwhile, auctions grew 2 percent in the fourth quarter.
"This part of the business is unique and profitable and adds to our selection," Donahoe said. "We'll do our best to have this market grow."
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