EBay Outlook Dismays Traders
Online auctioneer EBay Inc. on Wednesday hit analysts’ earnings target for the first quarter and reiterated its outlook for the remainder of the year, disappointing investors expecting bigger things from the e-commerce bellwether.
The San Jose-based company said it earned $248.3 million, or 17 cents a share, during the three months ended March 31. That represented a 3% decrease from net income of $256.3 million, or 19 cents, for the same period last year. The stock gave up almost 5% on the news in after-hours trading.
EBay accounted for the two quarters much differently because of new rules requiring publicly held companies to deduct the costs of employee stock options from their profit.
If not for the option expenses and a smattering of other items, EBay said it would have earned 24 cents a share in the quarter. That matched the average estimate of analysts polled by Thomson Financial.
Revenue rose 35% to $1.39 billion.
EBay released the results after the stock market closed. The company’s shares rose $1.47 to $40.35 during regular trading but retreated $1.86 in extended trading.
The downturn appeared to be driven by management’s forecast for the rest of the year, which was unchanged from previous projections even though the first quarter turned out to be slightly better than executives predicted three months ago.
Excluding stock option expenses, EBay predicted its full-year earnings will range from 96 cents to $1.01 a share on revenue between $5.7 billion and $5.9 billion. The average estimates had been earnings of $1.03 a share on revenue of $5.96 billion.
Many investors had been betting EBay would be more bullish, especially after the market’s negative reaction to the company’s cautious January forecast.
“We think it’s prudent at this stage to be conservative,” Chief Financial Officer Robert Swan told analysts during a conference call.
Once a Wall Street darling, EBay has fallen out of favor as its once-torrid growth has slowed amid stiffening competition internationally.
What’s more, Internet search king Google Inc. has launched a free listing service and online payment system that some analysts view as threats to EBay’s commission-driven auctions and market-leading PayPal service.
The shifting perceptions and challenges swirling around EBay have caused the company’s stock price to plunge more than 30% from its highs reached in late 2004.
Even as its market value has sagged, EBay has continued to attract more buyers and sellers. The value of merchandise sold through EBay during the first quarter totaled $12.5 billion, an 18% increase over last year. New listings climbed to 575.4 million in the quarter, a 33% improvement from last year, while registered users increased 31% to 192.9 million.
Looking to expand beyond auctions, EBay last year spent more than $4 billion on acquisitions that include Internet phone service Skype and online price-comparison service Shopping.com.
EBay also is trying to appeal to more shoppers with the planned introduction of a fixed-price service next week. Called EBay Express, the service is designed for consumers who want a more conventional shopping experience.
