eBay Steps to the Plate

SAN FRANCISCO -- Oh what a difference a quarter makes.

Since its last earnings report, online auction king eBay(EBAY Quote - Cramer on EBAY - Stock Picks) has replaced its CEO, changed its fee structure and policies, and weathered a seller boycott.

Now we're about to see what impact those changes will have on its first-quarter earnings, which will be reported after the close of trading on Wednesday.

The company expects net revenue in the range of $2 billion to $2.05 billion, and earnings in the range of 37 cents to 39 cents. Analysts predict first-quarter revenue of $2.07 billion and earnings of 39 cents a share.

For the year, eBay expects net revenue in the range of $8.5 billion to $8.75 billion, and earnings of $1.63 to $1.67 a share. Analysts forecast full-year revenue of $8.74 billion and earnings of $1.66 a share.

The company's stock took a hit in January when its guidance fell below Wall Street estimates. Since then, some analysts have expressed concern over the possible impact of eBay's new policies, which in part lower the fees sellers pay to list their auction items on the site but raise the commission charged by eBay if a sale goes through.

Sellers are also no longer allowed to post negative comments about buyers, although buyers may still post criticism about sellers. At the same time, eBay has jiggered its search so that sellers with poor ratings fall to the bottom while those with good ratings rise to the top.

Such moves prompted a boycott by sellers in February, however, eBay has claimed that it has felt no impact from it.

Sellers have organized boycotts in the past and come back to the site, but it is unclear if anyone will permanently leave eBay because of its new policies, especially now that they have other places where they can peddle their wares, like Google(GOOG Quote - Cramer on GOOG - Stock Picks) and Amazon(AMZN Quote - Cramer on AMZN - Stock Picks).

Also in January, longtime CEO Meg Whitman said that she would step down after serving almost a decade at the helm. John Donahoe, who previously ran eBay's Marketplaces division, replaced Whitman on March 31.

Donahoe has already made it clear that he would like to shift eBay's focus from auctions to fixed priced listings, which account for 40% of the company's marketplace revenue. At the same time, he plans to remain faithful to the auctions since they are still eBay's core business.

Last month at a technology conference, Donahoe emphasized eBay's desire to be better attuned to its buyers, noting that the company had previously paid too much attention to the sellers because that's who paid the fees.

Aaron Kessler, an analyst for Piper Jaffray, still sees a lot of promise in eBay.

"While we are somewhat disappointed with the lower-than-expected revenue guidance for 2008, which implies 11-14% revenue growth, we believe eBay is likely being conservative given the uncertainty of the economic environment and the fee changes," he wrote in his research. "We believe shares are attractive at current levels."

James Mitchell, an analyst for Goldman Sachs, expects eBay to post first quarter results above its own guidance as well as Wall Street's consensus. In his research from earlier this month, he wrote that the company should see stabilization and perhaps improvement in its gross merchandise volume, or the total value of all successfully closed listings on eBay's trading platforms.

Mitchell said he is a little more confident about eBay's gross merchandise volume having spoken with sellers, who have noticed an increased supply of listings because of the lower fee they must pay upfront. He noted that although a flood of listings might dilute the conversion rate to sales, eBay can alleviate some of that with its new gallery option that allows sellers to post photos of their items for free instead of a charge.

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