EBay outlook hammers shares, profit rises
SAN FRANCISCO (Reuters) - EBay Inc (EBAY.O) on Wednesday provided a cautious near-term outlook that reflected concern over a weak U.S. economy and changes it has been making to its auction business, sending its shares down 7 percent.
Investors have come to count on eBay raising its outlook each quarter, and were disappointed when the company said that revenue in the current quarter would be lower than expected, while leaving its full-year projections relatively unchanged.
That overshadowed a 22 percent gain in second-quarter net profit that beat Wall Street estimates, helped by a surge in listings and share buybacks.
"It's ancient history now, but in past years, investors knew eBay would start out each year conservatively and raise their outlook more and more as each quarter went by," Global Crown Capital analyst Martin Pyykkonen said.
"What eBay is saying now is, 'We don't want to go out on a limb,'" Pyykkonen said. "The economy is working against them."
Moreover, Bernstein Research analyst Jeffrey Lindsay said investors may have oversized expectations about how online sellers can perform in the weak economy.
Average selling prices for eBay fell in the second quarter due in part to more shoppers in the United States and Britain shifting to lower-priced goods, executives said.
The company has been lowering upfront listing fees to attract more sellers in response to slower growth in its main auction business over the past three years.
The tinkering with fees and efforts to improve trust between buyers and sellers are aimed at reviving growth amid competition from Amazon.com Inc (AMZN.O) and craigslist.com.
Second-quarter net income rose to $460 million, or 35 cents per share, from $376 million, or 27 cents a share, a year earlier. The company bought back 19 million shares worth $566 million in the quarter, helping to lift earnings per share.
Revenue rose 20 percent to $2.2 billion, helped by a 27 percent rise in international sales, while U.S. sales grew by only 12 percent. Analysts expected $2.17 billion, on average.
Excluding stock option expenses and merger-related costs, earnings were 43 cents per share, 2 cents above what analysts had expected on average, according to Reuters Estimates.
John Donahoe, who took over as chief executive in April, highlighted strength at its payment service PayPal, where revenue grew 33 percent to $602 million. At eBay's Web-based call service, Skype, revenue rose 51 percent to $136 million.
LISTINGS SURGE, USERS STAGNATE
For the third quarter, eBay said it expects revenue of $2.10 billion to $2.15 billion, and adjusted earnings per share of 39 cents to 41 cents. Those were below average analyst projections of 41 cents per share on revenue of $2.17 billion. Continued...
