eBay

(EBAY) - Get Report

has been attracting bargain hunters on Wall Street lately.

Shares of the San Jose, Calif., company fell more than 25% last year amid concerns about the company's $2.5 billion acquisition of Internet phone provider Skype Technologies. But this year they are up 5% as analysts point to the healthy growth in eBay's listings of items ranging from jewelry to oddly shaped sweet potatoes. The revival comes as the popularity of Internet shopping soars.

Now, as the online auction giant prepares to post fourth-quarter earnings after the close Wednesday, investors will be keeping an eye on voice-over-Internet-protocol darling Skype -- and what its progress means for the otherwise slowing eBay growth engine.

"We believe eBay continues to represent the best business model in the Internet sector and it remains relatively insulated from the heightened competition within e-commerce, Goldman Sachs analyst Anthony Noto wrote in a Jan. 12 note to clients. Noto rates the shares outperform.

He estimates that listings in the quarter rose 32% from a year earlier to 535.3 million and that the value of items sold on eBay jumped 29% to $12.7 billion. Analysts are forecasting earnings of 22 cents a share on revenue of $1.29 billion, according to Thomson Financial.

eBay, which also is the most visited e-commerce site, has benefited from the exploding popularity of Web shopping during the holiday season, which pushed up the value of the goods sold on the auction site. Yet that may not be enough to erase lingering concerns about eBay's growth prospects, analysts say.

"We continue to expect slower growth in the U.S. and Germany due to the view that the core business is maturing in its primary markets," said SG Cowen & Co. analyst Jim Friedland in a Jan. 17 note to clients. He rates the shares neutral.

Gross merchandise volume -- the value of the goods sold through eBay -- will be bigger internationally than in the U.S. for the first time ever this quarter, he says.

Analysts expect the company to show a 38% increase in sales in 2005. A year earlier, eBay's sales rose 51%. The question on the minds of investors is whether Skype can reinvigorate growth at eBay.

Some investors have criticized eBay for overpaying for Skype. eBay management points out that the company faced similar skepticism when it purchased PayPal in 2002 and that acquisition is now widely considered a success.

"It's been one of our smoother transitions in terms of acquisitions," says Henry Gomez, the head of Skype's North American business, in an interview.

Skype is one of the fastest-growing communications applications ever launched on the Internet, with more than 236 million downloads of the software. The computer-to-computer service is very popular internationally, where phone rates are expensive.

The challenge for eBay comes in getting companies to pay extra for additional services such as voice mail and forwarding computer calls to regular and cellular phones.

Not only is competition in the voice-over-IP market steep, but Skype's technology may make it less attractive for business users since it basically transforms computers into a telephone switch and takes up a lot of computer processing power, analysts say.

"Because you have in some cases very little control over what's happening over your computer network, that raises some problems for security-conscious businesses," says Lisa Pierce, a vice president at Forrester Research.

eBay, which is stepping up its efforts to educate corporate IT managers about Skype, disputes criticism of Skype. eBay hasn't seen any problems on its internal networks since thousands of employees signed up for the service following the acquisition, Gomez says.

"We have found that there is no security threat beyond what any piece of software can cause you," he says.