NEW YORK ( TheStreet) -- eBay ( EBAY) will host its first analysts day in nearly two years on Thursday, leaving Wall Street awaiting answers to some big-picture questions.Since the e-commerce giants last meeting in March 2009, its share price has tripled, its marketplace segment has stabilized, its PayPal/payments business has become even more dominant, it spun off its Skype business and its cash has ballooned to more than $7 billion. But the most noteworthy trend over the past two years has been eBay's efforts to move the company away from being a marketplace/e-commerce business and toward a payments business, which now makes up 40% of revenue and 25% of profits. This focus has allowed eBay to surpass earnings estimates for 18 consecutive quarters. In its fourth quarter, the company earned $559 million, or 42 cents a share, compared with $1.36 billion, or 1.02 a share in the year prior. Excluding costs related to the sale of its Skype business, eBay actually earned 52 cents a share. Revenue climbed 5% to $2.5 billion. Analysts were calling for a profit of 47 cents a share on revenue of $2.48 billion. For the most part, eBay has met its targets laid out at its analyst day in 2009. Now Wall Street is expecting the company to introduce a new three-year plan on Thursday. The meeting will begin at 11 a.m. ET. Here's a look at the top questions for eBay's management heading into its analyst day.
What's the long-term growth and margin outlook for the marketplace segment?
eBay has made significant strides at its core marketplace business. In March 2009, eBay guided marketplace revenue between $5 billion and $7 billion by 2011 and operating margin in the range of 35% to 45%. The company is largely on track to meet those goals. eBay has acknowledged the underperformance of marketplace, and rolled out a series of changes, including reducing or eliminating sellers fees and enhancing search results. "We expect eBay to discuss ongoing initiatives to roll out vertical shopping experiences, which appear to be driving slightly stronger velocity," Janney Capital Markets analyst Shawn Milne wrote in a note. "One of the key questions is whether eBay needs to provide fulfillment services to improve shipping from top rated sellers." Investors will also be inquiring about how eBay plans to improve its marketplace positioning internationally.
What's the long-term growth and margin outlook for its Payments segment?
eBay predicted in 2009 that its revenue for the PayPal/Payments business would reach $4 billion to $5 billion and operating margins would be in the range of 18% to 20%. "Our view here is that execution has been top notch," Citi analyst Mark Mahaney wrote in a note. In the fourth quarter, PayPal total revenue and total payments volume exceeded expectations, with 94.4 million active registered accounts, adding approximately 1 million active accounts per month. PayPal's net total payment volume was $26.9 billion. But there is one looming risk for PayPal as it faces potential regulatory issues from the Durbin Amendment, a piece of legislation that if passed would shift payment of so-called "interchange fees" from merchants to financial institutions. This could put pressure on PayPal to lower its merchant fees. What's also unclear is whether the payments segment can continue to overcome the drag of the marketplace business. One potential wild card for PayPal is the possibility of eBay spinning off the division. "Whereas eBay management was consistently opposed to such a step in the past, recent commentary has been more balanced," Mahaney wrote.
What is the targeted growth for eBay's mobile business?
"We expect eBay to talk at length on its mobile opportunities, not only for eBay shopping, but perhaps, more importantly, the rapidly evolving mobile payment environment," Milne wrote in a note. During its fourth-quarter earnings call, eBay noted that mobile is increasing the number of Internet-enabled transactions and in the process it is rapidly blurring the line between online retail and off-line retail. eBay's mobile applications have now been downloaded more than 30 million times in eight languages across 190 countries. And total gross merchandising volume for the full year reached nearly $2 billion.
What's eBay going to do with all its cash?
eBay ended 2010 with $7.8 billion in cash and marketable securities and about $1.8 billion in debt. Now the challenge is finding good use for this cash. Some of that cash will go to its Bill Me Later segment, which Mahaney said needs to be financed by cash on its balance sheet. Over the past several years, eBay has also been aggressively repurchasing shares. While share-repurchases have only been done in two out of the last eight quarters, eBay's repurchased shares were worth $1.5 billion in 2007 and $2.2 billion in 2008. None were conducted in 2009 and, $700 million worth of shares were bought back in the third and fourth quarters of 2010. One other possible use of its cash is strategic acquisitions. This brings us to our last question...
What's eBay's M&A strategy?
In 2010, eBay acquired four companies, with three out of the four purchased in December. These acquisitions include: Milo, a local shopping engine; Critical Path, a mobile application developer, and Brands4Friends, a German fashion shopping Web site. "While none of these acquisitions are transformative, they are accelerating time to market with innovative technology or increasing exposure to the new e-commerce models," Mahaney wrote. eBay paid about $200 million in cash for Brands4Friends, and Mahaney estimates that Milo and Critical Path were probably smaller deals. "The recent acquisition of Milo is an effort to bring more local inventory onto eBay's marketplace -- much like Google's Local Available Inventory format in search," Milne wrote. "We look for management to give further details on Milo integration and potential monetization strategy. Additionally, we see the Brands4Friends acquisition as another potential local opportunity." So our questions for eBay would be: Does it plan to fully integrate these technologies/services in its existing offerings? Does it plan to launch new products based on these acquisitions? How should we think about eBay's M&A strategy going forward? --Written by Jeanine Poggi in New York. >To contact the writer of this article, click here: Jeanine Poggi. >To follow the writer on Twitter, go to http://twitter.com/jpoggi. >To submit a news tip, send an email to: email@example.com.