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eBay Earnings Review: What Wall Street's Saying

NEW YORK (TheStreet) -- Shares of eBay (EBAY) plunged 5.1% to $50.80 following weak guidance, amid uncertainty in the U.S. for the upcoming holiday season.

For the fourth quarter, eBay said it expects a cautious environment, which was reflected in its guidance. The company expects to earn between 79 cents and 81 cents a share, with sales between $4.5 billion and $4.6 billion. Analysts expect eBay to earn 83 cents a share on $4.64 billion in revenue.

Though guidance for the fourth quarter was cautious, the third quarter was aided by continued strength in PayPal, the mobile payments giant.

PayPal saw a healthy 19% increase in revenue to $1.6 billion during the quarter. The payments platform ended the quarter with 137 million accounts, up 5 million sequentially, and 17% year over year. Net total payment volume grew 25% to $44 billion.

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The San Jose, Calif.-based Internet giant reported third-quarter earnings of 64 cents a share on $3.89 billion in revenue. Analysts polled by Thomson Reuters were looking for the company to earn 63 cents a share on $3.9 billion in sales.

Following the report, several Wall Street analysts were cautious on the U.S. holiday season, as it pertains to eBay, but remained optimistic overall.

Deutsche Bank analyst Ross Sandler (Hold, $56 PT)

"Tgt USD59 to USD56. eBay reported 3Q revenue slightly below and EPS $0.01 above consensus estimates, and reduced 4Q expectations. Importantly, eBay noted incremental weakness in the US e-commerce space, consistent with comscore desktop data, despite accelerating 2-year growth. The commentary is likely to weigh on the Internet sector, but we continue to believe that eBay is losing modest market share to others, including Google (PLA) and Amazon. The company's overall fundamentals largely remain intact, but at 22x 2014 GAAP EPS and the mid-teens EPS growth, we see little multiple expansion and believe shares should remain range-bound."

Canaccord Genuity analyst Michael Graham (Buy, $60 PT)

"eBay met our Q3 EPS estimates, but Q4 guidance has been pushed to the very low end of the previous range, and to a level slightly below our estimates. Q4 is being impacted by the expectation for a sluggish holiday period for U.S. eCommerce along with some higher spending on key initiatives. While the last three quarters have been less exciting than 2010-2012, we continue to believe that eBay's Marketplaces business can provide stable growth while Payments has a good chance of reaccelerating in the 2015-2016 timeframe. We believe Q4 guidance for decelerating revenue growth (13% at the low end vs. 14% in Q3) is somewhat de-risked."

Benchmark analyst Daniel L. Kurnos (Buy, $63 PT)

"eBay reported in-line 3Q results, with outperformance in Marketplaces revenue and incremental operating leverage offsetting a modest shortfall in PayPal revenue. However, guidance once again came in below expectations, driven by domestic macro weakness and caution regarding the holiday period. While we suspect management's near-term forecast may prove conservative, we see no change to the positive, consistent fundamental long-term trends. Therefore, although we acknowledge there could be some risk to the story over the next quarter, we reiterate our 2014 estimates, calling for accelerating growth in both primary business segments, and maintain our Buy rating."

Lazard Capital Markets analyst Brett Fodero (Buy, $63 PT)

"3Q results were mixed with revenue/EPS of $3.89B/$0.64 vs. consensus $3.90B/$0.63. We expect shares to remain rangebound in the near term based on disappointing 4Q guidance and the company's cautious stance on the US holiday season. Our thesis remains intact based on continued strong mobile user data (36% of new customers added via mobile), Merchant services TPV acceleration, and our positive stance on eBay's local and PayPal wallet initiatives."

--Written by Chris Ciaccia in New York

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