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eBay Tanks on Lower Outlook

eBay's first-quarter earnings beat estimates, but the company posts a second-quarter outlook that falls short of estimates -- sending shares lower in after-market trading.



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is continuing to tumble a day after it forecast second-quarter earnings that fell short of Wall Street's predictions.

The online auction site is looking for a profit between 27 cents and 29 cents a share and revenue between $2.15 billion and $2.2 billion. This is significantly below analysts' estimates of 40 cents on revenue of $2.21 billion.

eBay said after-the-bell on Wednesday that it earned $397.7 million, or 30 cents a share, an 11% increase from $357.1 million, or 28 cents, in the year prior.

Excluding one-time items eBay actually earned 42 cents a share, beating Wall Street's guidance by a penny.

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Revenue jumped 9% to $2.2 billion, in-line with expectations. eBay saw improvements in its core marketplace segment and continued growth in its PayPal service.

Marketplace revenue grew 13% to $1.4 billion, comprising about 64% of the company's total revenue. PayPal revenue spiked 26% to $809.3 million.

During the quarter, eBay made several initiatives to improve its marketplace, such as reducing or eliminating fees altogether for sellers and enhancing search results.

Despite the weak outlook, Susquehanna analyst Marianne Wolk says she believes in the Marketplace turnaround and that PayPal remains eBay's jewel.

On eBay's conference call last night, CEO John Donahoe said a spin-off of PayPal is not in the future right now. "I'll simply just repeat what I've said before, which is that we continue to believe the best way to drive long-term value for our customers and investors is by keeping these two businesses together," Donahoe said.

Shares of eBay are tanking 7.7% to $24.26 in Thursday morning trading.

-- Reported by Jeanine Poggi in New York.

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