EBay Inc (EBAY) Earnings Preview: Analysts Downbeat On Q4 Profits

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on January 21 2014 9:08 AM
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EBay Inc. (NASDAQ:EBAY), operator of the world’s largest online marketplace, is expected to post a 16.1 percent profit increase in the fourth quarter, on modest deceleration in Marketplaces revenue growth from eBay.com, offset by slight revenue acceleration from PayPal.

The San Jose, Calif., company, which will report fourth quarter results on Wednesday after markets close, is expected to record net income of $1.05 billion, or 66 cents per share, compared to $927 million, or 57 cents per share, a year earlier. Revenue is projected to be $4.55 billion, up 14.1 percent from $3.99 billion in the last quarter of 2012.

Excluding items, analysts expect earnings per share of 80 cents compared with 70 cents in the fourth quarter of last year.

Analysts appear underwhelmed as consensus earnings per share are even lower than the bottom range of the company’s own earnings guidance of 67 to 69 cents, which was published at the time of its third quarter earnings release.

ChannelAdvisor, the third party traffic tracker, reported that in terms of eBay’s Marketplaces, eBay.com’s same store sales (SSS) grew by 11.6 percent in the fourth quarter of 2013, significantly slower than the 18.9 percent year-on-year growth in the third quarter. Though it is worth noting that the correlation between ChannelAdvisor SSS data and eBay Marketplaces revenue has been lessening in the past year, as the company focused on growing relationships with larger merchants, according to a Goldman Sachs research note.

Two other factors may have some impact on revenue in the last quarter. The holiday season was six days shorter in 2013 compared to 2012, and eBay may have benefited at the margin from more shoppers moving online. However, eBay likely suffered from longer shipping times for many of its sellers, and it also faces a tough comparison with its fourth quarter results in 2012. As such, the company provided a cautious holiday outlook, which appears to be in line with the ChannelAdvisor data and analyst forecasts.

“We are forecasting Marketplaces revenue of $2.26 billion,” Goldman Sachs analysts wrote. “We expect growth to be 10.2 percent in 4Q, which assumes a neutral to slightly positive FX impact.”

The company’s payment division, PayPal, continues to outperform the rest. In particular, PayPal said its total payment volume (TPV) grew more than 115 percent year-on-year on both Thanksgiving Day and Black Friday. Worldwide, monthly unique visitors to PayPal grew 12.6 percent in the fourth quarter, compared to the 2.4 percent year-on-year growth in the third quarter, while monthly unique visitors in the U.S. grew 3.6 percent, compared to the 4.2 percent decline in the third quarter.

“We are forecasting PayPal revenue of $1.86 billion, up 21.0 percent [year-on-year] compared with the 18.6 percent growth achieved in 3Q,” according to the Goldman Sachs note.

Overall, eBay’s mobile traffic continues to grow robustly through November, according to comScore, a third -party traffic tracker. Total monthly uniques grew 40.6 percent year-on-year, while Marketplaces total uniques accelerated to 123.4 percent, and PayPal uniques grew 27.9 percent.

The company also officially closed the acquisition of Braintree on Dec. 19th, for $800 million in cash. While the newly acquired branch should not have a material impact on eBay’s total payment volume and revenue this quarter, the acquisition is expected to perform well for the company.

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