Bidding eBay Higher Ahead of Earnings

NEW YORK (TheStreet) -- Get ready for eBay's (EBAY) upcoming earnings release. If you're considering eBay for your portfolio, there is a lot to like.

EBAY Chart EBAY data by YCharts

eBay ( EBAY)

eBay is one of the world's largest online trading communities. eBay creates a powerful marketplace for the sale of goods and services by a passionate community of individuals and small businesses.

52-Week Range: $29.89 to $54.20

Book Value: $15.39

Price To Book: 3.4

Investors are looking forward to improving fourth-quarter earnings after the market closes on Wednesday. The consensus opinion is presently 69 cents a share, a progression of 9 cents (13%) from 60 cents during the corresponding period last year.

Analysts' estimates this quarter range from 59 cents to 70 cents per share. Last quarter the company made 55 cents per share, 1 cent more than the estimate.

Over half the analysts covering eBay rate it as a buy or strong buy; 23 of the 35 analysts covering the company give a buy recommendation, 12 analysts rate it a hold and none of the analysts recommend selling.

New investors from a year ago are happy, and analysts rating this company a buy have called it correctly. Analysts are calling for a price target of $56.31.

eBay's main competitors are ( AMZN), Google ( GOOG), Yahoo! ( YHOO), and Best Buy ( BBY).

In theory, a case can be made for adding a few other major players as competitor peers including WalMart ( WMT), Visa ( V) and MasterCard ( MA), but I will stick with the primary competitors in my analysis.

Amazon is easily the first on the list. I have written a lot about Amazon lately, including an article Friday, You're Nuts If You See Amazon's P/E as a Buy Signal. If you are deciding between eBay and Amazon, it's an easy choice, in my opinion. Go with eBay eight days a week.

eBay may be smaller than the others, but it has a lock on the auction sales space, and that's only part of their sales model. "Buy it now" and PayPal are strong revenue generators that I believe will continue to push the share price higher.

Other online sellers offer a wide variety of the features eBay enjoys. Google and Amazon have their payment systems, but nowhere near the scale of PayPal. The market is growing in proprietary payment systems at the expense of the traditional credit card companies Visa and MasterCard.

This quarter's report is the fun one. The fourth quarter is when the money really flows and investors should expect another beat. I believe eBay will beat by at least 3 cents, and guidance will be relatively favorable. Any macroeconomic events and/or changes will likely impact upon every online retailer relatively the same. With that in mind, as long as you want to be in this space, eBay is a great way to gain exposure.

Looking at eBay from a technical analysis view gives even more reason to remain bullish. The chart is easy to figure out. Display a weekly chart and the price action clearly moves from the bottom left to the upper right. How much easier can it get than that? Of course, it's logical to ask the next question: "Is the price too far extended?" I believe the odds favor the shares continuing at least into the earnings release.

Yahoo! already tried and failed at auctions. Don't expect another go at it again anytime soon. Even if it does try, it's unlikely to gain the critical mass needed to succeed.

Google is always a challenge and possibly the biggest worry. Google doesn't have to offer auction sales, it could simply offer merchants a free and promoted sales environment.

Short-sellers are not interested in betting against this one. Short interest is a non-factor at a rate of 1.2% of the float.

EBAY Revenue Quarterly Chart EBAY Revenue Quarterly data by YCharts

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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