NEW YORK (TheStreet) - EBay (EBAY - Get Report), on Tuesday evening, posted a mixed first quarter earnings report. While revenue growth at the e-commerce giant's payments, marketplace and enterprise divisions is generally in the high teens, the company gave second-quarter guidance that was a bit weak.
More to the point, eBay raised more than a few eyebrows after disclosing a plan to repatriate $6 billion in net foreign earnings, creating a $3 billion non-cash charge against the company's first quarter earnings.
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That charge meant eBay lost $1.82 per share in the first quarter. Adjusted EPS to exclude that non-cash charge, however, beat analyst consensus and the company's previous guidance. EBay reported a non-GAAP profit of 70 cents a share on revenue of $4.3 billion, beating core earnings forecasts.
But what is there to make of the $3 billion tax-related charge? Taking eBay's words at face value, the $6 billion net repatriation may aid the company in a variety of ways, bolstering U.S. cash balances significantly and allowing for investment in products such as PayPal, Bill Me Later and StubHub, while also giving the financial might to quickly make an acquisition.
According to eBay, the repatriation signals it sees investment opportunity in the U.S. versus abroad where much of the company's foreign earnings had been parked. When pressed to explain that change, eBay was a bit unclear as to whether it saw immediate investment opportunity in the U.S., for instance a large acquisition, or whether its repatriation reflected a long-term change.
"The company denied having a specific acquisition target(s) in mind, but we believe this move sends up a bright flare over Silicon Valley that it is looking for deals," Wells Fargo analysts said in a client note.
On a call with analysts, eBay confirmed that it continues to invest heavily in BRIC countries. However, the performance of eBay's BRIC investments and growth forecasts may be diverging. While eBay continued to express confidence in the company's growth trajectory in China and India, CFO Robert Swan did confirm geopolitical risks in Russia and a sharply slowing economy in Brazil had caused business in both regions to recently slow year-over-year.
One area of weakness was eBay's Marketplace division in the U.S>, which grew 10% year-over-year, while U.S. e-commerce grew 12% in the second quarter. Those revenues were impacted by weak auction activity at eBay and a falling take rate at StubHub, according to Bank of America Merrill Lynch analysts.
eBay shares were falling over 6% to $51.05 in early Wednesday trading.
Overall, many may be scratching their head from eBay's results, but, it's hard not to see the company as among the best-positioned in Silicon Valley to profit from consumers' increasing reliance on smartphones, mobile applications and new payment technologies to shop.
Furthermore, after a bruising battle with activist investor Carl Icahn that did cause some proxy-related expense to increase, eBay's investments such as Braintree, Magento and StubHub appear poised to pay off.
This year may be a crucial time where eBay's long-term investments in mobile commerce, local commerce, international expansion and data analytics more apparent to shareholders, Carl Icahn included.
Here are five key quotes from eBay's conference call, which bear watching.