eBay (EBAY) reports earnings on Wednesday after the close, andwhile whisper numbers are on the rise, but the most important informationwe’ll get will be below the headline numbers. Shares in eBayare up over 15% in the past three months, compared to a flat NASDAQcomposite.
Current consensus for the firstquarter is $0.30 to $0.31 per share, up 25% year-over-year. Revenueestimates are $1.69B to $1.75B, which would amount to about 23% growthfrom 2006 levels. None of the two dozen analysts that cover thestock are making any real changes to the bets laid down at the end of2006, either for the quarter or the full year. EBay is usuallypretty good at managing earnings, having met or exceeded estimates forthe past 5 quarters.
The big story for eBay thesedays is whether expenses can fall back in line with revenue; operatingincome actually fell slightly in 2006; while EBay grew the top lineat 31%, operating expenses rose over 43%. Some analysts have suggestedthat since the introduction of Yahoo’s Panama, ad rates have beenfalling on a per-click basis, which could help Ebay in the expense department. PayPal should put in anothergreat quarter, as they continue to add thousands of new merchants. So far Google Checkout isn’t mounting much of a threat, but it willbe interesting to see if management comments on (jabs) the competitorduring the conference call.
In the January call, eBay announceda $2 billion share repurchase program to be implemented over the next24 months. Considering the strong run the stock has had of late,some important color will be provided Wednesday as to how many shareswere bought in the first quarter.
Average selling prices areexpected to continue their uptrend (estimates are for double-digit growthyear-over-year), and overall listings have been up 8% to 10% so far thisyear, based on spot checks. The all-important revenue per listingmetric is expected to be in the range of $1.80 to $1.90, with some numbersas high as $1.95.
Of course lots of folks willbe looking over the Skype data, hoping to see sequential growth continuingin the 20% plus range, and growing monthly revenue per user. Skype’s$4 billion price tag notwithstanding, the revenue of recent acquisitionStubHub.com will also be of note; the current estimates are for $107 to $120 million in revenue during 2007. In the last conferencecall Meg Whitman said that integration with the ticket vendor was inthe early stages, so we’ll probably need to wait until July beforegetting a feel for the long-term earnings impact of the buy. Any update on rising cult favoriteCraigslist.org (in which eBay has a 25% stake) would be much appreciated,but don’t expect to hear much about monetization of the site on Wednesday.
While eBay definitely has somevery promising “side projects” going, how shares react will dependmostly on revenue and margin trends. Jim Cramer still likes thisstock going into earnings, having previously named it a top internet pick in February. Yahoo (YHOO) releases on Tuesday,and how well they do may add/subtract a little momentum from eBay’srelease, but investors should proceed cautiously after the big run-upheading into the release.
Ryan Barnes
April 16, 2007
Ryan Barnes can be reachedat [email protected]; he does not own securities in thecompanies he covers.
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