Earnings Preview: eBay Q2 2007 (EBAY, YHOO, GOOG)

eBay Inc. (NASDAQ:EBAY) is set to report earnings after the close Wednesday.  The Q2 estimates from First Call are $0.32 EPS & $1.78 Billion revenues.

eBay frequently gives guidance and they sometimes give guidance out beyond a year, even if it is guesswork and more of the ‘internal business plan.’  Next quarter is also expected to be somewhat flat sequentially with $0.32 EPS and $1.79 Billion revenues.  Fiscal 2007 estimates are $1.34 EPS & $7.4 Billion in revenues.  If the company gives a 2008 internal business plan, the street has $1.58 EPS and $8.7 Billion, and that translates to a forward 18% EPS growth and 17.5% revenue growth.  As a reminder, the company just held its annual meeting of shareholders last month.

The real question regarding eBay is if the stock can continue to perform, because shares are up nearly 40% from the lows over the last year and its current P/E suggests more than twice its growth rate after this year.  This is not to be a naysayer, but an observation.  The company now has a market cap of almost $47 Billion, so it trades at more than 5-times 2008 revenues, but only 21.6-times 2008 earnings.  It could boil down to earnings power.  Last quarter it claimed a total 588 million listings, up 2% from the same quarter in 2006; and PayPal listed 143 million total accounts, up 36% year-over-year.

Since the company has had its spat with Google (NASDAQ:GOOG) and with Yahoo! (NASDAQ:YHOO) being virtually discounted, there is still an incredible opportunity for the company to grow revenues.  It probably has a lot it can add via ad revenues, and most of that effort could trickle straight to the bottom-line.  The stock is at the higher-end of its trading range, which has been $31 to $35 for what looks to be 90% of the trading days in 2007.

It would be nice to hear about the company’s ongoing legal fight as well over the "Buy It Now" feature.  It has also been adding PayPal as more of a powerhouse, and so far it is showing that its Skype purchase wasn’t the big waste that many feared.  After this is all said and done, you might even expect Jim Cramer to come back out telling eBay to acquire Yahoo! again.  So far eBay is the only one of the Internet Big 4 trading up on the day.  Last quarter it repurchased about 10 million shares at an average price of just over $33.00, and the company still has $2 Billion it can use for buybacks trough January of 2009.

Jon C. Ogg
July 18, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.