Here's an excellent summation of the latest quarter from eBay that was highlighted yesterday and today at The Motley Fool. It comes from a Fool named Orangeblood:
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Here's my preliminary take on the latest quarter. I didn't get to listen to the conference call, so all
information is taken from the numbers in the press releases or past SEC filings.
The main issue
Once cent a share, two cents a share... who cares? The EPS can be manipulated in many ways, but
there are some important numbers that can't. In the past I've pointed out the strong relationship
between the total number of auctions on eBay and the gross merchandise sales (which is basically the
value of all goods sold at auction). According to the preliminary numbers out today, this relationship
continues:
Total number Gross merch.
of auctions sales
Year-over-year
increase 294% 280%
Sequential
increase 23% 19%
This relationship between auctions and gross merchandise sales is very similar to previous quarters,
although the gap between the two is a bit wider this time. Just what does that mean? It tells us the
average closing price of an eBay auction is slightly lower than the last quarter (either because of lower
prices or because more auctions closed without bids.)
It is very important to keep an eye on these two quantitative measures, because they are what drive
revenues. Think about it: How does eBay generate the vast majority of its revenue? From listing fees
(total auction count) and back-end "success" fees (gross merchandise sales).
Other issues
Some have raised concerns that operating expenses increased faster than sales year-over-year (197% vs.
169%) However, unless I've got some bad numbers, sales actually grew faster than operating expenses
sequentially (18% vs. 7%). No matter..... what was everyone blasting eBay's management for just a
few months ago? Not spending enough of "all that cash" to do something about the system crashes. We
would gladly increase expenses in the short term, we said, in order to stabilize the web site. Apparently
that is what management did, and all I can say is thank goodness (or thank Meg). According to what I
read today, Meg says she will continue to spend money in order to ensure a strong infrastructure,
especially with the busiest time of the year just ahead.
And finally, we can begin to develop some idea if other sites are siphoning users away from eBay.
Registered users grew from 5.6 million last quarter to 7.7 million... a healthy 37.5% sequential
increase. This number (along with the increases in auctions and gross merchandise revenue) tells me
either the competition isn't doing too well, or this industry's growth is so explosive there is enough pie
left over for others after eBay takes the lion's share.
This is about all I can gather from the few numbers that are out tonight. We'll have more to chew on
later. (And don't pay much attention to after hours trading.)
Later,
orangeblood
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Today was my first visit to the Fool's eBay message board. It looks a little more promising in terms of substance than the SI eBay board I have been reading the past few days.
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