eBay Flexes Solid Core

Shares of eBay(EBAY Quote - Cramer on EBAY - Stock Picks) continued to rally sharply Thursday after the company beat Wall Street expectations for its fourth-quarter results and showed that growth in its core business was reaccelerating.

The stock was recently up $2.40, or 8%, to $32.40.

Late Wednesday, the company reported earnings before items of 31 cents a share on revenue of $1.7 billion; analysts surveyed by Thomson Financial forecast earnings of 28 cents a share on revenue of $1.67 billion.

But perhaps most important, eBay reported that the momentum in its core business was back. Growth in its Marketplace business grew at 24% in the latest quarter, compared with 22% in the third quarter. The company's U.S. gross merchandise volume -- a closely watched metric used to gauge the health of its business -- also increased to 14% year over year, up from 13% from the quarter before.

Those numbers eased fears that eBay's bread-and-butter business was slipping beyond the company's control as a result of shifting consumer purchasing behavior on the Internet. The theory was that rapid growth of search engines such as Google(GOOG Quote - Cramer on GOOG - Stock Picks) may make it unnecessary to visit particular e-commerce sites, allowing users to zig-zag the Internet in search of items instead, boosting the chances that companies such as eBay would be rendered obsolete.

"eBay reported a good quarter and an excellent quarter relative to diminishing expectations," wrote Stifel Nicolaus analyst Scott Devitt in a note to clients on Thursday. "The fear entering results was that listings growth in the quarter [was] trending below expectations and that conversion rates may not make up the difference, despite a fee adjustment late in the third quarter to do just that." Stifel Nicolaus makes a market in eBay shares.

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