Q1 Preview: eBay (EBAY) Could Power Though as Mobile Payments Take Hold


Traders are buying shares of eBay, Inc. (Nasdaq: EBAY) Wednesday ahead of the company's first-quarter earnings report, expected out after the market closes. Shares are up1.5 percent to $33.55.

eBay is expected to report EPS of $0.46 on revs of $2.48 billion. Last quarter, eBay reported EPS of $0.52 on revs of $2.5 billion, both beating consensus views. Looking back at the first quarter of last year, eBay posted EPS of $0.42, excluding items, on revs of $2.2 billion, compared with consensus EPS of $0.41 and revs of $2.18 billion.

Shares gained 8.2 percent through the quarter and are up 7.1 percent since.

eBay stock is going for a forward P/E of 15.0 FY12 EPS estimates, compared with 42.2x at Amazon.com (Nasdaq: AMZN) and 39.7x for Netflix, Inc. (Nasdaq: NFLX).

Data from Bloomberg has 11 analysts with a Buy on eBay, 18 with a Hold, and one suggesting to Sell. The analyst price target average is $36, with a high of $44 and low of $22. Shares have traded in a range of $35.35 - $19.06 over the last 52-weeks.

Analyst Summary
  • Wells Fargo is looking for EPS if $0.46 on revs of $2.48 billion. The firm sees Marketplace net revenue growth of 8 percent year-over-year, with a 23.1 percent growth in Payments. On the call, Wells Fargo is looking for an update on Spring fee changes, thoughts on competition for PayPal (particularly from Payfone/American Express, MasterCard/Gemalto, Research in Motion/MasterCard, Visa, and Google.Verifone), and progress with local, social, and mobile initiatives.

  • Wedbush expects EPS of $0.46 with revs of $2.479 billion. The firm is looking for PayPal to propel earnings in the quarter, with sales of $993 million. Specifically, on PayPal: "We expect ~22% YoY growth in Total Payment Volume (TPV) for 1Q11, excluding contributions from Bill Me Later. We believe international should remain the primary engine of growth in Q1, increasing TPV 31% YoY, compared to 20% YoY in the U.S." Wedbush does expect that eBay will lose e-commerce market share overall, amid continued momentum with Marketplace. Operating margins should be flat in the quarter.

  • Kaufman seeks EPS of $2.504 billion and EPS of $0.47. Kaufman is also expecting Payments to lead the way, commenting "1) Payments segment grows at 20%+ rates, driven mainly by merchant services and to a smaller extent by international growth, digital goods and mobile payments; 2) eBay benefits from higher traction internationally, especially in countries where it does not compete directly with Amazon; 3) eBay benefits from the secular growth in eCommerce, due to its role as an "eCommerce enabler" to merchants and 4) rapid growth in mobile eCommerce." Kaufman also believes that eBay's market share in the U.S. is shrinking to Amazon, but that it should still be able to grow by mid- to high-single digits on an annual basis.

    On PayPal, Kaufman notes some advantages: "1) global reach (190 countries); 2) interoperability with multiple financial networks; 3) expertise in online security and fraud management. We believe competitors such as traditional networks (Visa, Mastercard, Amex) introducing online payments as well as new payments start-ups, will find it difficult to overcome these competitive barriers. While Near Field Communications ( NFC ) based payments are in early stages of development, we believe this trend will benefit PayPal over the long term."

  • Janney expects eBay to report slightly above its EPS estimate of $0.46 with revs of $2.46 billion. "1) we believe eBay's playbook of driving traffic to its top-rated sellers should ultimately improve the buying experience; 2) increased selection and an improved buying experience should begin to stem market share losses; and 3) expect strong growth at PayPal...We expect another solid quarter from PayPal given solid overall eCommerce growth in Q1, expanding Merchant Services adoption and growth on eBay. Specifically, we expect TPV growth of 19% to $25.4BN driven by 30% Merchant Services growth and 6% "on eBay" - which appears somewhat conservative given 25%+ growth in last several quarters (the comp is 100bps tougher q/q in Q1)."

  • BGC Partners is looking for EPS of $0.48 on revs of $2.479 billion. The firm sees gross merchandise volume of 14.04 billion, excluding automotive. "Marketplace revenue is estimated at 1,515M and 61% of total, representing 9.3% YoY growth and 0.6% sequential decline. Payments revenue is estimated at 973M and 39% of total, representing 20.2% YoY growth and 0.2% sequential growth. Total payment volume is estimated at 27.403B, growth of 2.0% sequential and 28.4% YoY. We expect 53.6% of revenue is international." BGC believes that velocity and average-selling-price will drive gains for eBay's Marketplace segment.
Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results withi0 n seconds of the release.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Stocks

Referenced Stocks: AMZN , EBAY , NFC , NFLX



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