EBay Reports Surge in Earnings, Raises Estimate for Second Half
By PUI-WING TAM
Staff Reporter of THE WALL STREET JOURNAL
EBay Inc., again flouting the gloom in the electronic-commerce sector, posted second-quarter earnings that were triple those of the year-earlier period and revenue that surged by 84%.
Despite an economic slowdown that has decimated the ranks of e-commerce concerns, the San Jose, Calif., online auction and marketplace company raised its earnings and revenue estimates for the rest of its 2001 fiscal year. In addition, eBay beat analysts' expectations for both quarterly net income and revenue.
"We're seeing sustained growth across categories," said Meg Whitman, eBay's chief executive officer. "We've enabled a marketplace where sellers in the millions bring goods that people want to buy in good times and in bad times."
For its fiscal 2001 quarter ended June 30, eBay posted net income of $24.6 million, or nine cents a diluted share, compared with $7.46 million, or three cents a share, a year earlier. Excluding amortization and other items, the company reported earnings of $33.5 million, or 12 cents a share, beating a consensus estimate from 23 analysts of nine cents a share, according to Thomson Financial/First Call. The analysts' predictions had ranged between eight cents a share and 10 cents a share.
EBay also posted second-quarter revenue of $180.9 million, up from $98.2 million a year earlier. Analysts, who had been raising their sales estimate over the past few weeks, had expected revenue of $165 million.
In a sign that the company sees its momentum continuing, eBay Chief Financial Officer Rajiv Dutta raised eBay's earnings estimate for the second half to about 21 cents to 22 cents a share, slightly above analysts' current consensus of 20 cents a share, excluding items. He also increased the revenue estimate for the second half to $385 million to $400 million, from analysts' consensus of $365 million.
EBay Business Is Still Strong, Chief Executive Whitman Says (June 15)
EBay's Net Surges on 80% Revenue Rise, Driven by Growth in Web-Auction Volume (April 20)
EBay reported earnings after the market close. As of 4 p.m. Thursday, the stock was at $64.40, down $2.14 in Nasdaq Stock Market trading. In after-hours trading, the stock rose to $66.89.
Ms. Whitman attributed eBay's earnings and revenue growth to increases across all its business lines, including a 74% year-over-year increase in gross merchandise sales to a record $2.25 billion. Gross merchandise sales are a measure of the total dollar value of merchandise sold on eBay. In addition, Ms. Whitman pointed to growth in established international markets, such as Germany and the United Kingdom, and strong fixed-price sales, where customers buy an item for a set price immediately.
Analysts applauded eBay's results, but several worried that the stock continues to be expensive. Steve Fitzgibbons, an analyst at J.P. Morgan H&Q, calculates the stock is trading at roughly 152 times 2001 earnings and at about 90 times 2002 earnings. "EBay needs another acceleration to get its stock price up, and these quarterly results aren't that acceleration," he said. "The solid quarter is already reflected in its price."
Safa Rashtchy, an analyst at U.S. Bancorp Piper Jaffray, argued that "the valuation is in practice ignored as long as the company is hitting on all cylinders." Added Anthony Noto, an analyst at Goldman Sachs: "Right now, eBay continues to exceed even our high-end expectations each quarter."
Indeed, eBay continues to show that its business remains one of the Internet's most profitable. The company's gross margin -- the percentage of revenue represented by raw profit -- jumped to 82% in the second quarter, from 75% a year earlier. However, gross margin was flat from the first quarter. Mr. Dutta said the flattening was expected, and added that he anticipates gross margins to remain above 80% for the rest of the year.
Write to Pui-Wing Tam at pui-wing.tam@wsj.com |
