EBay Second-Quarter Sales Forecast Beats Estimates on PayPal; Shares Gain
EBay Inc. (EBAY), the world’s largest online marketplace, forecast higher second-quarter revenue than analysts had estimated, driven by demand for its PayPal payment service and improvements to its main site.
Sales this quarter will rise to as much as $2.65 billion, the company said today in a statement. Excluding some costs, profit will be 45 cents to 46 cents a share. Analysts had projected revenue of $2.52 billion and earnings of 46 cents, according to data compiled by Bloomberg.
Chief Executive Officer John Donahoe has bought at least seven businesses in the past year as he works to revive sales growth and revamp EBay’s main marketplace. The company has pushed deeper into mobile services with the acquisitions of Red Laser, Milo and Where.com, positioning itself to benefit from a shift to shopping on smartphones.
“More people are using PayPal; more people are using EBay,” said Colin Gillis, an analyst at BGC Partners LP in New York. He recommends buying EBay shares, which he doesn’t own. “It’s just what we wanted to see.”
While EBay’s sales climbed 16 percent last quarter, the pace was dwarfed by Amazon.com Inc. (AMZN)’s 38 percent revenue gain in the period. EBay’s shares increased 2.9 percent earlier today, following Amazon’s earnings report. Some investors may have been looking for that same kind of momentum at EBay, Gillis said.
EBay rose 22 cents to $34.25 in late trading, after closing at $34.03 on the Nasdaq Stock Market. Shares of the San Jose, California-based company have climbed 22 percent this year.
“People who saw the Amazon revenue growth yesterday drove up the stock today, hoping for a fast trade,” Gillis said.
First-quarter net income rose 20 percent to $475.9 million, or 36 cents a share, from $397.7 million, or 30 cents, a year earlier. Sales climbed to $2.55 billion, compared with the $2.48 billion predicted by analysts.
Donahoe has thrown money and engineers at the company’s main U.S. site to reignite growth. He changed the search engine to help buyers find items and reduced listing fees for sellers. Those moves have created a “baseline” that the company can now build on, Donahoe said.
“I continue to be pleased with the progress our team is making,” he said on a conference call. “Our U.S. business is clearly turning the corner.”
PayPal remains a faster source of growth for EBay, with revenue from the division rising 23 percent to $992 million last quarter. The unit accounts for 39 percent of EBay’s sales and will eventually be larger than the company’s e-commerce sites, Donahoe has said.
Donahoe has used acquisitions to expand into location-based services and strengthen its ties with brick-and-mortar chains. The company agreed to buy GSI Commerce Inc. last month for $2.4 billion acquisition to help woo big retailers and challenge Amazon.
In its earnings report yesterday, Amazon posted better- than-anticipated sales. Revenue in the first quarter rose to $9.86 billion, beating the $9.54 billion average prediction of analysts. The sales growth reassured investors concerned about the company’s soaring spending on new warehouses and data centers. Amazon’s shares rose 7.9 percent today, their biggest gain since October 2009.
EBay was founded in 1995 as an online auction site. After auctions fell out of favor with many Internet users, Donahoe began steering the company toward fixed-price listings. EBay also owns StubHub.com and Shopping.com, as well as stakes in Skype Technologies SA and Craigslist.
Reviving the main marketplace site remains a challenge, said Heath Terry, an analyst at Canaccord Genuity.
“While PayPal continues to gain share and has significant opportunities in mobile, international and local, the trends at EBay, particularly in the U.S., remain less encouraging,” he said yesterday in a note to investors.
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