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Ebay Q1 Earnings May Top Estimates, Focus On Outlook

 April 17, 2012 08:11 PM

(R. Chandrasekaran) Online auctioneer eBay (Nasdaq: EBAY) will announce its first quarter results after the market closes on April 18. The company will likely report more than 10 percent earnings growth and more than 23 percent revenue upside driven by strong, continuous momentum in PayPal.

However, the first quarter results will be lower sequentially as the fourth quarter results benefited from holiday sales. However, given the company's track record in the last four quarters, its earnings may come above Street analysts' expectations.

The recent launch of PayPal Here and the impending introduction of the new wallet should keep positive sentiment going. The marketplace GMV upside is expected to support teens TPV on-eBay, but another quarter of deceleration in off-eBay TPV is around the corner. The company's earnings are also likely to benefit from currency impact. This was evident when RBC Capital Markets analyst Ross Sandler adjusted his revenue forecast for the first quarter to $3.17 billion from $3.14 billion.

[Related -eBay Inc (EBAY) Q4 Earnings Preview: About to Be Bid Lower?]

Wall Street analysts are expecting the company to generate revenue of $3.15 billion and deliver earnings of 52 cents a share. This represents revenue growth of 23.8 percent, whereas earnings are seen to rise 10.6 percent. While releasing fourth quarter earnings number, eBay guided adjusted earnings of 50 – 51 cents a share and GAAP earnings of 37 – 38 cents a share and revenues of $3.05 - $3.15 billion for the first quarter.

[Related -ETF Periscope: Sentiment On Main Street At Odds With Jubilation On Wall Street]

Last year, the company earned 47 cents a share on revenues of $2.55 billion.

In the last 60 days, analysts have raised their EPS estimate by a cent, while they predicted 54 cents a share three months ago for the first quarter. Similarly, for the second quarter, analysts have raised their EPS projection by a cent to 55 cents a share from 54 cents a share two months back.

In the fourth quarter, eBay's net income was $1.98 billion or $1.51 per share, sharply higher than $559.2 million or 42 cents a share in the year-ago quarter. The company's adjusted earnings were 60 cents a share, which is 15.3 percent higher than 52 cents a share in last year quarter.

Net revenues surged 35 percent to $3.38 billion from $2.50 billion in the previous year quarter. Both earnings and revenues were above analysts' predictions of 57 cents a share and $3.32 billion.

For the 28 brokerages, the highest and lowest price target for eBay is $48.00 and $28.00 respectively. Similarly, their mean and median targets are $39.89 and $40.00 respectively. Interestingly, no analysts have a Sell rating. Nineteen analysts have a Strong Buy or Buy rating on eBay shares, while 14 analysts have a Hold rating. Meanwhile, RBC Capital has kept a price target of $39.00 and rate it as Outperform.

In the 52-week period, the stock traded between $26.86 and $38.18. Shares of the company closed Monday's regular trading at $35.5, which is 26.8 percent higher than lowest target of $28.00, but are 11.3 percent lower than median target of $40.00. After the fourth quarter results, the stock witnessed 17 percent upside based on Monday's closing price. In the meantime, the Nasdaq advanced around 8 percent. For the year 2012, eBay enjoys a 17 percent gain, whereas Nasdaq was up by 14.7 percent. Clearly, the stock has so far outperformed the broader market.

Investors look forward for an upward revision in the earnings forecast from the company for 2013. The outlook will dictate the stock's further movement.



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