eBay (EBAY) Rises After Narrowly Topping Estimates

Shares of eBay (EBAY: Charts, News) rose yesterday, after the online auction site posted fourth quarter earnings that topped analysts expectations. The company earned 57 cents per share, or $751 million, on revenue of $4 billion.

EPS declined 62%, while revenue rose 18%, from the prior year quarter. The dramatic drop in earnings was caused by the sale of Skype to Microsoft in 2011, which inflated its earnings by $8.5 billion last year. Excluding one-time charges, eBay earned 70 cents per share, beating estimates by a penny, while its revenue was squarely in line with expectations. eBay attributed its robust earnings to a strong holiday shopping season at its main website, and increased digital payments at PayPal, its online payment arm. Daily Chart
Looking forward, CEO John Donahoe stressed the company's focus on mobile applications to capitalize on the rising popularity of smartphones and tablets, which he considers an easier way to catch the attention of younger shoppers. "Mobile users tend to be younger, they buy in different categories, they are a different demographic," Donahoe stated. Many analysts consider PayPal to be eBay's strongest asset. PayPal's revenue rose 24% to $1.54 billion in the fourth quarter, while adding five million users, its biggest quarterly gain in eight years. PayPal now has approximately 123 million users, who contributed to the 700 million payments the company processed during the quarter. Consumers are increasingly using mobile apps from eBay and Amazon while they shop, often turning brick and mortar retailers such as Best Buy (BBY: Charts, News), Target (TGT: Charts, News) or Wal-Mart (WMT: Charts, News) into large showrooms for later Internet purchases. Donahoe forecasts that PayPal and eBay will process more than $20 billion in mobile transactions each during fiscal 2013. PayPal deducts a service charge from merchants for delivery of payments, while eBay charges fees for product listings and sales. The company also discussed plans to transform PayPal into a strong mobile payments tool to disrupt the traditional payment methods of cash, checks or credit cards. Mobile payments accounted for 10% of total PayPal payments in 2012, and its mobile applications have been downloaded on over 120 million devices. PayPal is also expanding into offline services, inking deals with 23 retailers, including Abercrombie & Fitch (ANF: Charts, News), Barnes & Noble (BKS: Charts, News), RadioShack (RSH: Charts, News) and Home Depot (HD: Charts, News). Starting in Spring 2013, PayPal's partnership with Discover Financial Services (DFS: Charts, News) will allow it to be accepted at any location that accepts Discover credit cards. The company is also testing out some experimental payment approaches at select locations. At a Jamba Juice store in Emeryville, California, eBay is testing a smartphone app where customers can pre-order on their smartphone, pay by PayPal, and pick up their orders without waiting. At select restaurants, eBay is also working with NCR Corp. (NCR: Charts, News) to create a system that allows customers to pay the bill with their smartphone, without waiting for the check. Donahoe was clear with the aim of these projects, stating, "Our intent is to drive PayPal to be the digital wallet." Shares of eBay trade at 17.5 times forward earnings, with a 5-year PEG ratio of 1.28. The stock is up 78% over the past twelve months. More prudent investors could wait for the stock to retrace to its 50-day moving average of $51.95, or possibly its 200-day moving average of $47.93, before starting to build a position. The stock does not pay a dividend. Other News About EBAY EBayPosts 17% Increase in Q4; Inching Up Wall Street Forecasts eBay narrowly beats estimates. EBay Management Discusses Q4 2012 Results A transcript of eBay's earnings conference call. Other Stocks in the News Status Update: It's Time to 'Like' Facebook Is it finally safe to buy Facebook? 3 Reasons to Buy Celgene Is Celgene the best bet in the pharmaceuticals sector? Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Jan 18, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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