Online marketplace eBay Inc provided investors with a bullish 2011 profit outlook after the holiday quarter showed signs it is delivering a promised turnaround, as improvements in its buyer experience helped boost sales at its marketplaces unit.
Its shares rose 2.4 percent after hours.
The company, which also owns fast-growing Web payments unit PayPal, exceeded Wall Street profit estimates for its holiday fourth quarter, helped by more items sold and at higher prices, and cited a stabilized macroeconomic environment.
We're becoming a stronger, more competitive company, Chief Executive John Donahoe told analysts, citing innovation that has attracted more buyers due to a more convenient shopping experience.
Customers shopped a dramatically different eBay in the fourth quarter of this year than a year ago. The shopping experience is now cleaner, faster and easier to navigate, he added.
EBay is in the last year of a three-year plan to turn around its marketplaces business, which connects online buyers with sellers.
We were waiting for the turn and the turn has happened, said BGC Partners analyst Colin Gillis. You see it in sold items as well as rebounding average selling prices. They're buying more items and they're also paying a bit more as well.
EBay, which pioneered the online auction, has hoped to prove that improvements to its site and user experience, including a more targeted search engine and daily deals, is encouraging traffic and delivering more consistent sales.
Fourth quarter results and 2011 guidance should keep investors enthused about this name despite the recent run-up in eBay's share price, said Jefferies analyst Youssef Squali, who also cited robust growth at PayPal and operating efficiency.
The stock was up 25 percent year over year at Wednesday's close.
For the full year, eBay expects adjusted earnings of $1.90 to $1.95 on revenue of $10.3 billion to $10.6 billion.
That compares with the $1.85 per share on revenue of $10.19 billion expected by Wall Street.
As we enter 2011, we believe the overall macro environment has stabilized, said Chief Financial Officer Bob Swan.
EBay, like many companies dependent on consumer spending, had been hurt by economic uncertainty, posting tepid marketplaces sales as consumers cut back on nonessential items. But the company's third-quarter results showed momentum and executives cited stabilization of the U.S. market.
Net income for the fourth quarter was $559.2 million, or 42 cents per share, compared with $1.36 billion, or $1.02 per share, a year earlier.
On an adjusted basis, eBay earned 52 cents per share, surpassing the 47 cents expected, on average, by analysts, according to Thomson Reuters I/B/E/S.
A lower tax rate also helped boost earnings.
MORE USERS AND SALES
During the fourth-quarter, active users rose 5 percent year over year while sold items rose 10 percent.
Revenue rose 5 percent to $2.495 billion, fueled by a 17 percent increase at eBay's main marketplaces unit and a 25 percent rise at PayPal, which has consistently grown at a digit percentage rate.
Total revenue was above the $2.488 billion Wall Street had been expecting.
Gross merchandise volume, a closely watched measure of the total value of goods sold, rose 6 percent, excluding vehicles, beating some analysts' expectations.
Donahoe said he still was not satisfied with 5 percent GMV growth in the United States, which lags the overall e-commerce market. The company has faced intense competition from online retailers, especially Amazon.com, which is due to report its holiday quarter sales and earnings next week.
EBay has been aggressively pushing its mobile platform, where consumers can use their smartphones to scan bar codes and compare prices with eBay's, in a bid to reach more users.
Donahoe said gross merchandise volume from mobile would double to $4 billion in 2011.
For the first quarter, eBay is expecting adjusted earnings of 44 cents to 46 cents per share on revenue between $2.4 billion to $2.5 billion.
Wall Street has been expecting earnings of 45 cents on revenue of $2.42 billion.
Ahead of eBay's earnings report, options traders took a bearish stance, with puts outnumbering calls among options slated to expire within three months. [ID:nN19235548]
Shares rose 2.4 percent to $29.80 after hours.
(Editing by Steve Orlofsky)