EBay Posts 53% Jump in Profit
Online auctioneer EBay Inc. had Wall Street again bidding for its shares Wednesday after reporting a 53% jump in second-quarter profit, fueled by recovery in its biggest markets.
EBay shares rose 14% to $39.82 in after-hours trading.
Net income reached a record $291.6 million, or 21 cents a share. Excluding certain one-time items, earnings were 22 cents a share, 4 cents better than the consensus of 23 analysts surveyed by Thomson First Call. Revenue rose to $1.09 billion, up 40% from a year earlier, outpacing analysts’ estimates.
The San Jose-based Internet giant also hiked its profit and revenue forecast for the full year after struggling in recent quarters to meet investors’ lofty expectations.
A fourth-quarter earnings miss announced in January -- the first in EBay’s 10-year history -- sparked fears that EBay’s best days were behind it. Its stock, trading at $51.53 the day of the earnings release, plunged 19% the next day and has yet to fully recover.
But with Wednesday’s results, EBay executives said they hoped to convince Wall Street that the company can keep increasing revenue at breakneck speed despite its size.
“This is a young business,” Chief Financial Officer Rajiv Dutta said. “There’s a lot of growth ahead.”
Analysts and investors seem to have gotten the message. EBay stock fell 50 cents to $34.87 in regular Nasdaq trading before the earnings announcement, then rocketed up after hours.
“If I were to use one word on the quarter, it would be ‘flawless,’ ” said Scott Devitt, an analyst with Legg Mason. “EBay is still a very high-growth business. The quarter’s results go a long way in pointing this out to the investment community.”
EBay warned in the first quarter that its biggest markets, the U.S. and Germany, had performed worse than expected. But each began to turn around in the second quarter, Chief Executive Meg Whitman said. New listings, the total value of all items sold and the number of people who bid, bought or listed an item on EBay all hit records.
“We saw strong growth across every part of the business around the world,” Whitman said. “Clearly EBay has strong momentum going into the second half of the year.”
EBay’s auctions business in the U.S. has always been its biggest moneymaker, but the international business nearly surpassed it during the quarter. U.S. marketplace revenue grew 27% to $423.6 million, and international marketplace revenue rose 51% to $418.8 million.
The new markets overseas are less profitable, however, because EBay, as a newcomer, often has to lower auction fees to win new users. Fifty-two percent of EBay’s users and 51% of the total value of items sold came from markets outside the U.S.
Its payment service, PayPal, generated $243.9 million in revenue, up 51% from a year earlier.
Bumps are to be expected from a company that’s charting new territory in e-commerce, said David Edwards, an analyst with American Technology Research.
“This isn’t a business where there’s an explicitly clear business model,” Edwards said. EBay “created the concept of an online marketplace and really made it work. Now what you’re seeing is their level of sophistication continue to increase.”
