Sifting Thru eBay's Earnings (EBAY)

eBay Inc. (NASDAQ:EBAY) is on deck for earnings today.  First Call has estimates pegged at $0.33 EPS and revenues at $1.83 Billion; next quarter estimates are $0.38 EPS and $2.06 Billion revenues; its Fiscal-2008 targets have a much wider range but that estimate looks like $1.61 EPS on $8.82 Billion.

• Its most recent social networking launch was panned by many;
• it recently acquired ViA-Online in Germany;
• a key patent fight was ongoing;
• At one point, Jim Cramer was hoping for a major merger here.

Analysts have an average price target of $40 to $41, so if the news is good there will likely either be "valuation" comments or raised targets.  Shares are up over 20% from the recent lows, and have been stuck in a $38 to $40 range for most of the last five weeks.  If you use this months options that expire Friday, it appears that options traders are braced for a move of up to 3.5% to 4% in either direction.

This is only one of several recent calls, but Cantor Fitzgerald just maintained its SELL rating with a $30 target yesterday.  A counter-call to that was American Technology Research, which reiterated a Buy rating and raised the target from $43 to $45 in its note.

eBay’s SKYPE signed an internet voice pact with MySpace just yesterday, and this has also contributed to some optimism.  Skype needs all the hype it can get because the founders already hinted that they thought eBay overpaid when it acquired Skype.

One of the big underlying things to watch here is the fear of mergers.  Many have feared that eBay will again make more mergers.  We’ll be watching this one closely along with its other metrics.

Jon C. Ogg
October 17, 2007