eBay Earnings Preview: Putting Icahn In The Rear-View Mirror
eBay (NASDAQ: EBAY), which apparently has successfully resisted Carl Icahn's pressure to spin off its PayPal unit, is scheduled to report its first-quarter 2014 results Tuesday, April 29, after the markets close.
Investors will have an eye on the growth from eBay's core marketplaces business, given increasing concerns about competition from the likes of Amazon.com, Google, Groupon and others. There is also the question of whether the stock buyback plan from 2012 has concluded and the new one announced earlier this year has begun.
Analysts on average predict that eBay will report that its revenue for the quarter increased more than 12 percent year-over-year to $4.23 billion. Earnings of $0.67 per share are also in the consensus forecast. That would be up from a reported profit of $0.63 per share in the comparable period of last year.
Note that the consensus earnings per share (EPS) estimate has remained steady over the past 60 days. The company has come within a penny of EPS expectations in the previous four quarters, beating in three (including the fourth quarter) and missing in one.
In the fourth-quarter report, eBay attributed strong results to mobile commerce and to PayPal. The report also touched on Icahn's proposal to replace board members and spin off PayPal. The share price retreated about four percent in the week following the fourth-quarter report.
Looking ahead to the current quarter, the forecast currently calls for year-over-year and sequential growth on both the top and bottom lines. That consensus EPS estimate also is unchanged in the past 60 days. Full-year revenue so far is projected to be almost 14 percent higher than in 2013.
eBay provides online platforms, tools, and services to help individuals and merchants in online and mobile commerce and payments. Its sites include eBay.com, Half.com and StubHub. Its services include PayPal, Bill Me Later, BillSAFE and Zong.
The company was founded in 1995, and its headquarters are in San Jose, California. eBay is a component of the S&P 500, and it now has a market capitalization of more than $69 billion. John J. Donahoe has been the chief executive officer and president of eBay since March 2008.
Competitors include Amazon.com and Overstock.com. The former is expected to post net losses in the next two quarters but on revenue growth of more than 20 percent. The latter is forecast to have essentially flat EPS in the next two quarters, on revenue growth of less than 10 percent.
During the three months that ended in March, most of the news was about the ongoing feud with activist investor Carl Icahn. But eBay also settled a legal dispute with L'Oréal, announced a reduction in the CEO's compensation and saw sales at StubHub fall after some fees were eliminated.
eBay has a long-term earnings per share growth forecast of more than 13 percent and a forward earnings multiple less than the trailing price-to-earnings (P/E) ratio. Its operating margin is greater than the industry average, but it has a return on equity of less than percent. It offers no dividend.
The number of eBay shares sold short, as of the most recent settlement date, represented less than two percent of the total float. Short interest has declined in the past two periods. At the current average daily volume, it would take a little more than one day to close out all of the short positions.
Of the 40 analysts surveyed by Thomson/First Call who follow the stock, 12 rate it at Strong Buy, and another 15 also recommend buying shares. The analysts' mean price target, or where they expect the stock to go, is about 15 percent higher than the current share price.
At the time of this writing, shares traded at about the same level as at the beginning of the year, as well as just below the 200-day moving average. Over the past six months, the stock has outperformed Amazon.com, Groupon and Overstock.com, but it has narrowly underperformed the S&P 500.
At the time of this writing, the author had no position in the mentioned equities.
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