EBay Earnings Up 28% on Strong Overseas Revenue
EBay Inc. on Wednesday reported a 28% rise in first-quarter earnings -- thanks mostly to strong international sales, which may soon surpass its U.S. business.
The world’s biggest online auctioneer also hiked its profit and revenue forecast for 2005.
Despite the good news, there were signs that EBay’s once-torrid growth rate is slowing, especially in its two biggest markets: the United States and Germany. That leaves the company reliant on markets where it’s less entrenched -- and can’t charge as much -- to keep up the pace.
“The underlying problem at EBay is that growth is decelerating, and the growth that is taking place is incrementally less profitable,” said David Garrity, an analyst at Caris & Co.
EBay’s financial results rebounded from the fourth quarter, when the 10-year-old Internet giant missed analysts’ expectations for the first time. First-quarter net income rose to $256.3 million, or 19 cents a share, from $200.1 million, or 15 cents. Excluding certain one-time items, EBay beat the Street by 2 cents a share.
Its shares rose 94 cents to $33.11 on Nasdaq, then gained 9 cents after the bell.
After years as an Internet darling, EBay recently has found itself squeezed between shareholders and the entrepreneurs who sell goods on the site. Sellers responded to a recent hike in some listing fees by accusing EBay of trying to profit at their expense, and investors have complained that EBay’s revenue was no longer growing as fast as they had expected.
Its shares, adjusted for a February 2-for-1 stock split, have fallen 43% this year.
Adding to investors’ concerns that EBay’s best days were behind it, EBay’s highly regarded chief executive, Meg Whitman, acknowledged last month that she had interviewed for the CEO job at Walt Disney Co. She withdrew her name, but Whitman’s public flirtation with Disney caused some analysts to question her commitment to EBay.
Whitman said in an interview Wednesday that she saw bright days ahead for EBay and that she did not regret the Disney interview.
“It was good in some ways, because it reaffirmed my belief that EBay is the right place to be,” she said. “I could not be more excited about the opportunities ahead.... I am firmly in the saddle for many years to come.”
The first quarter started unusually slowly, however, which Whitman attributed in part to seller frustration over the increased fees EBay said it would charge to list goods sold in EBay Stores. The company took extraordinary measures, including offering improved customer service and a month of free listings, and jump-started sales.
Overall, revenue rose 36% to $1.03 billion, matching the consensus of analysts polled by Thomson First Call. Its PayPal payment service brought in $233.1 million.
People continued to flock to the auction site in increasing numbers. EBay had 147.1 million registered users in the quarter, representing a 40% increase.
Most of the new users came from overseas, where auction revenue came close to surpassing domestic revenue for the first time. EBay pulled in $404.8 million in U.S. listings and $393.8 million overseas, and Whitman said she expected international auction revenue to surpass the U.S. figure by the end of the year.
Yet EBay faces stiffer competition from local auction sites -- and therefore must often charge lower fees -- in new markets such as China, where it’s investing heavily. EBay also spent more to market its service.
Still, EBay executives said the investment would pay off as those markets matured. They also said less than 50% of U.S. consumers shopped on EBay, leaving room for it to grow even in its strongest market.
EBay raised its 2005 revenue forecast slightly, to as high as $4.36 billion, from $4.35 billion. It also boosted its profit forecast to as high as 73 cents a share, from its earlier forecast of as much as 70 cents a share.
