eBay Inc. (NASDAQ: EBAY) – Q1 FY 2011 Earnings Preview
Tuesday, April 26, 2011 4:07 PM

EBay Inc. (NASDAQ: EBAY) is expected to report its first quarter FY 2011 earnings on Aril 27, 2011. During fiscal 2010, eBay's reported EPS exceeded analysts' consensus estimates by margins in the range of 2.40 percent to 10.60 percent.

In an update, eBay Inc. outlined its three-year growth plans for the company's global PayPal and eBay Marketplaces businesses. The company projected double-digit annual revenue and earnings growth for 2011-2013, with revenues expected to reach at least $13 billion in 2013 compared with approximately $9 billion in 2010. PayPal is expected to significantly increase revenue to $6 billion to $7 billion in 2013, driven by consumer preferences, market expansion, and innovation in the areas of mobile, digital, social and local.

For the first quarter, analysts' EPS estimates range from a low of $0.44 to a high of $0.49 per share, compared with consensus estimate of $0.46 per share to $0.42 per share in the year ago quarter. For this quarter, analysts' revenue estimates range from a low of $2.44 billion to a high of $2.52 billion, compared with a consensus estimate of $2.48 billion or $2.20 billion in the same quarter a year ago. For the quarter ended March, 2011, the consensus EPS forecast has remained unchanged for the last 60 days at $0.46 per share.

In the last 52 weeks, eBay Inc.'s stock has been trading in the range of $19.06 to $35.35. The last trading price of the stock was $31.61 on April 15, 2011. On April 6, 2011, analysts at Kaufman Bros. reinitiated eBay Inc. stock with a buy rating.

EBay's most prominent business is ebay.com, an internet auction website that connects individual buyers and sellers worldwide. EBay generated overall revenue of $9.2 billion for FY 2010, an increase of 5 percent from $ 8.72 billion reported for FY 2009. The company's growth rate has slowed since its early years as the company faces fierce competition, and changes in customer behavior and expectations. However, the company's PayPal business is growing rapidly, and that could reverse the company's growth pattern.

In the last quarter ended December 2010, eBay reported revenues of $2.5 billion, an increase of 5 percent, or 10 percent excluding Skype, compared with revenue of $2.37 billion in the same quarter FY 2009. The company recorded fourth quarter net income on a GAAP basis of $559.2 million, or $0.42 per diluted share, and non-GAAP net income of $683.8 million, or $0.52 per diluted share, representing a 24 percent increase excluding Skype, compared with net income of $551 million in the same period of 2009. The fourth quarter increase in non-GAAP earnings per diluted share was due primarily to solid productivity, strong growth and a lower tax rate.

For the full year, eBay Inc. posted $9.2 billion in revenue, net income on a GAAP basis of $1.8 billion, or $1.36 per diluted share, and non-GAAP net income of $2.3 billion, or $1.73 per diluted share. On a non-GAAP basis, excluding Skype, net revenue was up 13 percent for the full year compared to 2009 and earnings per diluted share were up 18 percent.

During the first quarter FY 2011, on March 28, eBay Inc. agreed to acquire GSI Commerce (NASDAQ: GSIC), a leading provider of e-commerce and interactive marketing services, for $29.25 a share, or total consideration of approximately $2.4 billion. The acquisition, which will be financed with cash and debt, is expected to close in the third quarter of 2011. Also on April 12, eBay agreed to acquire additional shares in GittiGidiyor, the leading online marketplace in Turkey. The deal follows eBay's acquisition of a minority stake in the company in 2007. Upon closing of the transaction, eBay will own approximately 93 percent of the outstanding shares of GittiGidiyor.

In September 2010, eBay's board authorized a stock repurchase program that provides for the repurchase of up to $2.0 billion of its common stock, with no expiration from the date of authorization. As of December 31, 2010, $1.9 billion remained for further repurchases of its common stock under its $2.0 billion stock repurchase program approved in September 2010. EBay have never paid dividends on its common stock.

In a fast changing and demanding industry, eBay competes with companies like Amazon.com Inc. (NASDAQ: AMZN) and Google Inc. (Nasdaq: GOOG). In the trailing 12 months period, Amazon reported earnings of $2.53 per share on revenue of $34.20 billion, while Google reported earnings of $27.29 per share on revenue of $31.12 billion. On the other hand eBay reported earnings of $1.36 per share on revenue of $9.16 billion.

EBay Inc. has a total market capitalization of $41.04 billion. The company has a P/E ratio of 23.24, lower than the industry's average P/E of 24.80. The P/B and P/S ratio of the company is 2.68 and 4.48, respectively, compared with the industry's P/B and P/S ratio of 8.32 and 0.85, respectively. The net profit margin of the company is 22.41 percent, much higher than the industry's average margin of 6.50 percent. The ROE of the company is 12.38 percent, marginally lower than that of the industry's ROE of 12.60 percent.



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