Q3 Preview: Analysts See PayPal as Earnings Catalyst for eBay (EBAY)


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Shares of eBay (Nasdaq: EBAY) are trading higher today, ahead of the company's third quarter earnings report, expected out after the market closes today. Shares are up1.0% to $25.79.

The marketplace mega-colossus is expected to report an EPS of $0.37 on revs of $2.18 billion. The numbers are just about in-line with what the company reported for the third quarter last year. In Q210, eBay had an EPS of $0.40 on revs of $2.2 billion, both slightly ahead of the market consensus.

Shares of the company showed strength through the quarter, gaining 24.2% to $24.40 at the end of September. The stock is currently up just 8% on the year.

The company is trading for a P/E of 14.6x FY11 EPS estimates, cheap compared to peer Amazon.com (Nasdaq: AMZN) which is going for 44.1x.

Data from Bloomberg has 16 analysts with a Buy, 14 with a Hold, and one suggesting to Sell. The analyst price target consensus is $27.10, with a high of $30 and a low of $15.

Analyst Ratings Through the Quarter
Citi upgraded the company from Hold to Buy in August, with a price target of $28.

Morgan Keengan started EBAY at Market Perform in early September.

eBay preannounced that they believe their third quarter earnings will come in at the high end of its previously issued guidance, which called for an EPS of $0.35 - $0.37 and revs of $2.13 - $2.18 billion.

Deutsche Bank notes that the core marketplace business at eBay remains weak, which will allow for Amazon to take market share from the company. They note that eBay is not showing the same success that it had in Europe several years ago, mostly from more intense competition from both online and brick-and-mortar retailers, alternative choices for sellers, and shortcomings of its user interface. Deutsche maintains their Sell rating going into earnings, with a $15 price target. Deutsche expects an EPS of $0.37 on revs of $2.12 billion. Key items on the call should be advertising spending plans, duplicative listings issues, North American management, consumer demand trends, country specific trends, and the impact of foreign exchange and fee changes.

Janney thinks that PayPal will drive strong growth in Q3, while U.S. market trends remain stable to potentially up. Janney sees eBay reporting Q410 guidance that will be in-line with the Street consensus EPS of $0.44 and $2.4 billion in revs. Janney has a Buy rating and $29 fair value on the stock.

Finally, J.P. Morgan sees eBay with revs of $2.22 billion in the quarter and an EPS of $0.38. They note that volume grew 4.5% in H110, behind the overall growth of 14% in U.S. eCommerce volume. JPM also sees PayPal as a bright spot, and see growth of 21% CAGR from FY09 to FY12. JPM has a Neutral rating and price target of $25 on the shares.

eBay Inc. is expected to release their Q310 earnings on Wednesday, October 20, 2010, at approximately 4:00pm EDT. Stay tuned to StreetInsider.com's EPS Central section to see our analysis of the highly-anticipated quarterly results within seconds of their release.

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

This article appears in: Investing Stocks
Referenced Stocks: AMZN , EBAY

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