Updated from Jan. 24Shares of eBay ( EBAY) climbed Thursday as investors applauded a fourth-quarter earnings report that beat Wall Street's expectations. The stock was recently up $3.49, or 11.6%, to $33.49; Piper Jaffray upgraded the shares to market perform on Thursday, citing its expectations that eBay can continue delivering acceptable earnings results, depsite deteriorating fundamentals. The online auction giant said Wednesday that earnings rose 24% to $346 million, or 25 cents a share. Revenue grew 29% to $1.7 billion. Excluding items, the company earned $431 million, or 31 cents a share, for the fourth quarter. Analysts surveyed by Thomson/First Call forecast eBay to earn 28 cents a share on $1.67 billion in revenue for the fourth quarter. Fears that eBay's core Marketplaces business was slowing beyond the company's control seem to be allayed for the time being. Marketplaces revenue totaled $1.2 billion for the fourth quarter, a growth rate of 24% over the $1 billion reported a year ago. The closely watched metric of eBay's gross merchandise volume - the amount of merchandise sold over eBay -- also was up to $14.4 billion for the quarter, a 20% gain year over year. eBay's efforts to reignite growth in its core business by tinkering with the various listings and incentives it offers seem to be paying off, CEO Meg Whitman said in an interview. "Our marketplace business had a strong quarter as a result of the efforts we undertook to rebalance it," said Whitman. "The conversion rates where higher and ASPs
eBay's other lines of business made headway during the quarter as well. Net revenue for Pay Pal, eBay's market leading payment service, came in at $417 million for the quarter, posting a growth rate of 37% year over year. A growth in new accounts helped drive the total payment volume of funds paid through the service up 36% year over year to $11 billion. eBay's Skype telephony service also posted solid gains, with revenue up 164% year over year to $66 million and the number of users growing 129% to 171 million. "We own three of the best brands on the net and that is asset you continue to see us build upon," Whitman said. For the first quarter of 2007, eBay expects earnings before items of 28 cents to 30 cents a share on $1.67 billion to $1.72 billion in revenue. For the full year, eBay expects earnings before items of between $1.25 to $1.29 a share on revenue between $7.05 to $7.3 billion. While up slightly from guidance the company had previously issued, the forecasts generally fall in line with Wall Street estimates. Analysts surveyed by Thompson/First Call forecast the company to earn 29 cents a share on revenue of $1.7 billion for the first quarter. First Call had expected full-year EPS of $1.23 on revenue of $7.15 billion for the year.
eBay's board OK'd the expansion of the company's stock repurchase program up to an additional $2 billion of the company's common stock within the next two years. eBay repurchased about 31 million shares of its common stock at a cost of around $1 billion during the quarter for a total cost of about $1.7 billion since the program was launched in July 2006. eBay CFO Bob Swan said during the conference call that the company benefited from the difficulty shoppers had in finding popular gifts like the Sony ( SNE) PlayStatione3 and the Nintendo ( NTDOY) Wii at traditional retailers. While eBay doesn't provide data for the items specifically, eBay "clearly benefited" from high bids placed for such hard-to-find gifts. Whitman also added that the company benefits from popular holiday items in more ways than one, since users who come to the site looking for them ultimately end up making other purchases. eBay also said that the launch of Google's high-profile Checkout service, which is similar to eBay's PayPal and which Google promoted heavily during the holiday season, may have actually helped rather than hurt PayPal. "We have been monitoring this quite closely, and what is interesting is that when a new entrant creates a lot of interest and news, it is the market leader that is usually the beneficiary," Whitman said.
eBay executives also touched on what seemed to be an emerging discrepancy between the closely watched eBay listings growth number, frequently cited by analysts to predict the health of the company and the company's financial performance. In the first half of the year, eBay showed relatively healthy listings number, but that failed to translate into its bottom line. During the last quarter, analysts issued notes of concern about the company's listings growth, but the financial results turned out to be impressive. eBay's quest to find a balance between its store and auctions listings may have had a hand in this puzzle. A flood of low-quality listings may have crowded the field at the beginning of the year. Later, a drive of higher-quality listings may have ultimately led to fewer listings overall, but it resulted in a higher conversion rate and a higher gross merchandise volume. Whitman said eBay continues to think about changes to boost its core auction business, including simplifying the site and making it easier to use.