Re: 'tis a good time to buy ebay, folks!
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EBay's Earnings Climb 53%
On Strong Auction Revenue
By MYLENE MANGALINDAN
Staff Reporter of THE WALL STREET JOURNAL
July 21, 2005
Internet auctioneer eBay Inc. eased concerns about slowing growth, posting a 53% increase in second-quarter profit on a 40% revenue jump fueled by accelerating growth in the U.S., its biggest market.
EBay also raised its financial targets for the rest of the year. The earnings and bullish forecast sent eBay shares up 13% in after-hours trading.
EBay, San Jose, Calif., reported net income of $291.6 million, or 21 cents per share, compared with $190.4 million, or 14 cents, a year earlier. The result topped eBay's forecast and the estimates of Wall Street analysts.
Revenue rose to $1.09 billion from $773.4 million, exceeding eBay's forecast of $1.03 billion to $1.05 billion.
The earnings were reported amid concerns by investors and analysts that eBay's biggest auction businesses are maturing. Through Wednesday, eBay shares had tumbled 40% this year, to $34.87 in 4 p.m. trading on the Nasdaq Stock Market. But in after-hours trading, eBay shares soared to $39.42, their highest level since March.
Revenue growth at eBay accelerated for the first time in 2&frac12; years.
In the first quarter, by comparison, revenue increased 36%. Revenue from U.S. auctions jumped 28%, an improvement from 19% in the first quarter, marking the first time in five quarters that growth had accelerated.
Growth also picked up at eBay's PayPal payment-processing unit.
The increase "reinforces our view that [eBay's] growth opportunity remains vast," wrote Goldman Sachs analyst Anthony Noto, in a research note. "EBay represents the best business model within the Internet sector." Goldman has done investment-banking work for eBay.
In an interview, eBay Chief Financial Officer Rajiv Dutta credited new features, revamped marketing and enhanced communication with sellers for the faster growth rate. He said eBay had subtly altered some pages on its Web site so those pages would appear more prominently in the results on search engines such as Google Inc. and Yahoo Inc. EBay also tweaked its listings in categories such as apparel, industrial goods and home and garden products, he said, contributing to more listings and higher average selling prices.
Analysts said eBay had successfully increased its commissions without hurting its growth. EBay said it had 440 million auction listings in the second quarter, in line with analysts' expectations.
"They are able to extract more revenue from sellers," said Safa Rashtchy, an analyst with Piper Jaffray.
Gross merchandise volume, or the total value of all successfully closed listings on eBay's trading sites, reached $10.9 billion.
The U.S. represented 54% of total revenue, unchanged from the first quarter.
In its new forecast, eBay said it expects revenue this year of $4.34 billion to $4.41 billion, which is more than the company's earlier estimate of $4.27 billion to $4.36 billion. EBay said it now expects earnings per share of 77 cents to 78 cents, up from 71 cents to 73 cents. For the third quarter, eBay projected revenue of $1.05 billion to $1.07 billion, and earnings of 18 cents a share, an improvement from earlier forecasts.
Write to Mylene Mangalindan at email@example.com