Saturday, January 15, 2011

eBay Inc. (NASDAQ: EBAY): Q4 Earnings Preview 2010

eBay Inc. (NASDAQ: EBAY) is scheduled to release its fourth-quarter earnings after the closing bell on Wednesday, January 19, 2011. Analysts, on average, expect the company to report earnings of 47 cents per share on revenue of $2.48 billion. In the year ago period, the company reported earnings of 44 cents per share on revenue of $2.37 billion.

eBay Inc. and its subsidiaries provide online marketplaces for the sale of goods and services, online payments services, and online communication offerings to individuals and businesses in the United States and internationally. It operates in three segments: Marketplaces, Payments, and Communications.

In the preceding third quarter, the San Jose, California based company's net income was  $432 million, or 33 cents per share, compared to $350 million, or 27 cents a share, in prior-year quarter. On an adjusted basis, the company earned 40 cents a share in the latest quarter. Revenue grew 1% to $2.25 billion from $2.24 billion. Analysts, on average, expected the company to report earnings of 37 cents per share on revenue of $2.18 billion. 

At its last earnings call in October, eBay said that it expects fourth-quarter GAAP earnings of 37 cents to 40 cents per share, non-GAAP earnings of $0.45 to $0.48 per share, and net revenues of $2.39 billion to $2.49 billion. The company also raised its fiscal 2010 financial guidance. For the full year 2010, eBay now expects GAAP earnings of $1.30 to $1.33 per share, non-GAAP earnings of $1.67 to $1.70 per share, and net revenues of $9.05 billion to $9.15 billion. Previously, the company anticipated GAAP earnings in the range of $1.23 to $1.28 per share, non-GAAP earnings of $1.60 to $1.65 per share, and net revenues in the range of $8.8 billion to $9.0 billion, excluding Skype.

Ebay, which started as an online auction company, later added fixed-price items to its marketplace in order to position itself as a conventional online retailer. The fixed price format, while impacting margins negatively, is making the company more competitive and management’s focus on technological improvements will further improve customer satisfaction.

Meanwhile, Paypal has continued to grow at a remarkable pace. At the end of the third quarter, PayPal had more than 90 million active accounts in 190 markets and 24 currencies around the world. 

EBay recently announced that PayPal will set up an international e-commerce hub in Chongqing, China. PayPal is testing the service and hopes to offer it to merchants across China in the second half of 2011.The company said that PayPal will have more than 1 million merchants in Greater China, which includes Hong Kong and Taiwan, by the end of this year. China has the world’s largest online population with 440 million users.

The company is targeting mobile commerce market to drive future growth. The company, which has emerged as a leader in the m-commerce market, recently announced that global mobile sales generated nearly $2 billion in 2010, up from $600 million in 2009.  During the holiday shopping season (Nov. 25 – Dec. 25), U.S. eBay mobile sales grew 134 percent over the same period last year, generating nearly $100 million in GMV; worldwide, mobile sales grew 166 percent generating $230 million in GMV. The e-commerce company says its mobile apps, which give users access to eBay’s global marketplace on the go, have been downloaded more than 30 million times in eight languages, and in over 190 countries.

During the quarter in review, the online marketing giant greed to pay US$200 million or 150 million euros in cash to buy brands4friends, a Germany-based online shopping club, in an effort to strengthen its position in Europe. The company expects the acquisition, which is subject to regulatory approval among other conditions, to close in the first quarter of 2011. eBay does not expect this acquisition to have a material impact on its 2011 financial results. The company also acquired Milo, a local shopping engine that provides consumers access to accurate, real-time, local store inventory and pricing. 

In terms of stock performance, EBay shares have gained nearly 22 percent over the past year.

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