January 25, 2007

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eBay surprised Wall Street yesterday by reporting earnings that soared 24 percent from 2006's comparable quarter, beating most analysts' estimates for the online auction site.

Overall, eBay also reported strong guidance for the coming quarter and all of 2007, which analysts and investors certainly liked.

In after-hours trading, eBay's stock jumped 12.5 percent to nearly $34 on news of its strong earnings.

Excluding certain items, eBay reported 4th quarter earnings of 31 cents a share, compared to analyst estimates of 28 cents per share, and up from 20 cents per share in the comparable 2006 quarter. Including all one-time gains and charges, net income was declared at 25 cents per share.

eBay's revenue was higher at $1.72 billion, up 29 percent from the $1.33 billion in sales that the company reported for the fourth quarter two years ago, and higher than the $1.67 billion predicted by Wall Street analysts.

eBay's core business had a strong fourth quarter. The total value of all items sold on the site in the quarter reached $14.4 billion, up 20 percent from $12.0 billion in the year-ago quarter.

eBay's shares declined 32 percent in the previous year as investors worried that the company's core business was maturing and that it wasn't finding new growth markets.

Analysts have said the company needs to diversify beyond its main online auction business, which it has been trying to do with its PayPal online payment unit and Skype Internet telephone service.

"All three of the company's business units delivered impressive results this quarter, including record net revenues from our MarketPlaces business, strong total payment volume on PayPal and a triple-digit increase in the number of Skype users," said eBay CEO Meg Whitman in a statement.

Overall, eBay benefited from last year's strong online shopping rush, when more people bought gifts on the Internet than ever before.

Additionally, the company had been actively working to counteract a trend towards lower-profit store-format listings dominating the auction site.

Advertising giant Google has recently challenged eBay with its Google Checkout product, using deep discounts to attract potential new customers.

Investors appeared to be pleased by the company's guidance. eBay said it expects net revenues for the first quarter of 2007 to be in the range of $1.67 billion to $1.72 billion, compared to analysts' estimates of $1.67 billion.

The company also said it expects earnings of 28 cents per share to 30 cents per share, compared to estimates of 29 cents. For the whole year, the company said it expects earnings of $1.25 to $1.29, compared to the $1.23 expected by analysts.

Revenues were expected to be between $7.05 billion and $7.3 billion, in line with analysts' predictions of $7.16 billion.

Two weeks ago, the company agreed to acquire online sports ticket reseller StubHub for $310 million, with the transaction expected to close in the first quarter of 2007.

Last month, the company made the important decision to fold its main operation in China, opting instead to partner with a local wireless company, Tom Online, with a much larger present base of customers.

Yesterday, eBay's stock went up 4.8 percent in Nasdaq trading to close at $30.00.

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Source: CNN Money

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