This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

eBay Poised to Alleviate PayPal Fears (Update 1)

Updated from 2:14 p.m. EST to provide analyst comments regarding PayPal in the sixth paragraph.

NEW YORK ( TheStreet) -- When eBay (EBAY) reports first-quarter results after the stock market closes Wednesday, analysts expect that the company will reiterate the highlights of its analyst day meeting in March while attempting to alleviate fears about the ability of eBay's PayPal e-commerce business to sustain profitability.

"I think the market may still need some convincing about that [PayPal], so any more commentary about plans to offset the potential fees in the credit card companies, how they will be able to compete in what's becoming a more competitive digital wallet landscape I think is something that investors will keep any eye on," R.J. Hottovy, an analyst at Chicago-based Morningstar said over the phone.

If the company handles all this well on the earnings call, "I think most investors will walk away from the call happy," said Hottovy.

At last month's analyst meeting, eBay highlighted continued momentum in the company's Marketplaces business, in particular in mobile transactions and payments. It also mentioned the huge international opportunity the company is presented with, as it tries to expand into the emerging markets and PayPal tries to move towards more points of distribution online.

The company also provided commentary to alleviate fears about PayPal's ability to sustain profitability in the face of competing platforms coming to the market but also MasterCard (MA - Get Report) potentially enacting a digital wallet fee this summer. MasterCard is expected to begin charging fees for PayPal transactions that go through its payments network.

Scott Kessler, an analyst with S&P Capital IQ said that while eBay is "extremely" well positioned for online and mobile transactions, he's finding it harder to buy into the company's real world retail story. "I'm skeptical about that," he said. PayPal has forged widespread alliances with vendors, restaurants, convenience stores and gas stations to result in millions of locations that offer PayPal, but Kessler said that it still hasn't shown that its real world services offer any additional advantages over credit card payments and the type of security it's known for in the mobile space and online.

Colin Gillis, an analyst at BGC Partners in New York, said eBay is his top pick for exposure to e-commerce and payments. He estimates that the company will book $3.7 billion in revenues, representing a 15.5% year-on-year growth and 5.2% sequential decline. Analysts polled by Thomson Reuters are looking for sales of $3.7 billion.

His earnings estimate is 64 cents a share versus 55 cents the prior year, 70 cents in previous quarter and the consensus target of 62 cents.

"They just finished two years of accelerating growth ... that momentum should continue," commented Gillis over the phone. "Guidance should be in line and people should be positive on its multi-year outlook because they had upbeat data at the analyst day."

Analysts will continue to keep an eye on the company's gross merchandise volume, a closely watched measure of eBay's performance.

"We view sentiment as good for eBay given that the company has ... put out solid three-year targets for GMV growth and their track record for executing on those goals," noted John Blackledge, a New York-based analyst at Cowen & Co.

Written by Andrea Tse in New York

>To contact the writer of this article, click here: Andrea Tse.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
EBAY $22.01 0.00%
MA $81.97 0.00%
AAPL $94.99 0.00%
FB $99.54 0.00%
GOOG $678.11 0.00%


Chart of I:DJI
DOW 16,014.38 -12.67 -0.08%
S&P 500 1,852.21 -1.23 -0.07%
NASDAQ 4,268.7630 -14.99 -0.35%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs