EBay Trims Q2 Outlook As Europe Slows

Investor's Business Daily

EBay (EBAY) shares fell late Wednesday after the e-commerce and payments giant reported first-quarter revenue below Wall Street forecasts and gave weak guidance for the current Q2.

San Jose, Calif.-based eBay earned 63 cents a share, excluding items such as stock compensation. That was 14.5% above a year earlier and a penny over the consensus estimate of analysts polled by Thomson Reuters.

Revenue rose 14% to $3.748 billion, shy of analyst views for $3.765 billion. It was the smallest gain in seven quarters, despite strength in its PayPal and Marketplaces units.

EBay sees adjusted Q2 profit of 61-63 cents a share, which would be an 11% gain at the midpoint. Analysts had expected 66 cents. It sees revenue of $3.8 billion to $3.9 billion, below views for $3.953 billion.

The Internet giant blamed a weaker European economy and British pound, along with increased investments in new market opportunities.

EBay maintained its full-year 2013 guidance of $16 billion to $16.5 billion in revenue and EPS of $2.70 to $2.75.

Shares of eBay fell 3% in after-hours trading following a regular-session loss of nearly 2%. But analysts didn't seem worried.

"I'm not going to over-read the Q1 report because it's an odd quarter," said ITG senior Internet analyst Steve Weinstein. "I'm not sure if it's representative of what to expect for the rest of the year and beyond.

He noted that the auction pioneer is rolling out products and phasing in changes like lower Marketplace fees. He also noted that Q1 2013 had one less day than Q1 2012, impacting results.

"Our three core businesses are strong," eBay CEO John Donahoe told analysts in a conference call after reporting results.

PayPal Still Active

PayPal, eBay's online payments service, saw sales surge 18% to $1.55 billion.

Donahoe said PayPal gained 5 million accounts, or 16%, ending Q1 with 128 million users.

EBay's global revenue surged 16% in Q1 to $1.96 billion. U.S. revenue jumped 13% to $1.79 billion. Revenue for eBay's marketplaces unit, including auctions, rose 13% to $1.96 billion.

Donahoe said Marketplaces gained 3.9 million new users in Q1 and ended the quarter with 116 million, for a 13% increase.

Gross merchandise volume, the value of all goods and services sold on eBay, excluding vehicles, rose by 13% to $18.33 billion in Q1 vs. a year earlier.

ITG's Weinstein noted that eBay's performance may have been affected by a slow start to overall e-commerce activity in Q1, though the pace jumped toward the end of the quarter. He also cited the shorter Q1.

Scot Wingo, the CEO of ChannelAdvisor, a software maker that helps third-party retailers sell on large e-commerce websites, noted that eBay's March same-store sales shot up 19.2% on a gross merchandise volume basis. That was a sharp pickup from February's 8.2% gain, which was hurt by weather and consumer sentiment factors.

"EBay's third-party sales seem to be doing very well," Wingo said.

EBay launched its first major fee change since 2010 on March 19, lowering what it charges many sellers in a competitive move vs. Amazon (AMZN). Some fee changes kicked in on April 16. The rest go into effect on May 1.

Donahoe said in a March 28 analyst day presentation that eBay anticipates annual sales will be $21.5 billion to $23.5 billion in 2015. It expects to process $300 billion in global commerce that year, up from $175 billion in 2012.

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