eBay Earnings Preview
After the close, eBay (EBAY) will report its Q2 (June) results.
Q2 (June): $0.18 EPS on $1.043 bln in revs
Q3 (Sep): $0.18 EPS on $1.061 bln in revs
FY'05 (Dec): $0.78 EPS on $4.335 bln in revs
FY'06 (Dec): $1.00 EPS on $5.542 bln in revs
Conference Call Info: 1.800.474.8920 at 5:00 PM ET
Click here for the webcast
• Domestic & International growth rates
• Global listings count - Street expectation is approximately 438 mln
• Plans for stimulating transaction growth in U.S. and abroad
• Operating Margins - average of four estimates seen is 33.2%, with a range of 29.6% to 35.1%
• Pacific Growth Equities (7/18) - the firms' revenue and pro forma EPS estimates of $1.037 bln and $0.18, respectively, are generally in line with consensus estimates... we expect Q2 results to reveal additional signs of degradation in the underlying metrics of eBay's business an issue we have been focused on for several quarters... we think management's stand-alone outlook for the remainder of 2005 could be lackluster... sluggish early listings data in Q3:05, a seasonally slow period to begin with, may also be a factor. In addition, foreign currency fluctuations, which significantly aided eBay's performance over the past year, may be largely neutralized or, perhaps, work against the Company in 2H:05. Lastly, key growth products/services/areas at eBay (e.g., ProStores, PayPal, China) offer generally lower margins than do core parts of eBay's marketplace business. When combined with aggressive investment plans related to China, PayPal, and kickstarting the U.S. and Germany, we think stand-alone eBay guidance (i.e., excluding the impact of Shopping.com) for 2H:05 could be neutral-to-negative.
• Deutsche Bank (7/18) - We expect eBay to post 2Q revs/EPS in line with our $1.042bn/$0.18 estimates based on 439m listings (vs. our 437m estimate). The company must contain marketing expenses (to build demand) while still delivering on listings gains. Based on 3Q growth to date (up 23-24% Y/Y excluding promotions) we think 3Q guidance could be weak, reflecting a sluggish start to the quarter... Our 3Q EPS estimate is $0.18 on revenues of $1.055bn and listings of 445m (up 28% Y/Y and 2% Q/Q).
• Jefferies & Co. (7/15) - Our 2Q05 estimates are for revenue of $1.045B and cash EPS of $0.18... With eBay generating 46% of its revenues overseas, strength in the US dollar vs. the Euro (average US$/Euro rate of $1.26 in 2Q05 vs. $1.31in 1Q05) will likely have an adverse effect on revenue. We estimate that every $0.05 increase in the US dollar corresponds to $18M in currency loss. This could lead to $15-20M lower revenues on a sequential basis... We are modeling for 435M listings in 2Q05 vs. 332M in 2Q04, and for gross merchandise volume (GMV) of around $10.5B, up 31% y/y and 1% sequentially. We estimate the take rate for 2Q05 at 7.24%, down from 1Q05s 7.31%... We expect management to revise guidance for 2H05 and FY05 to reflect the Shopping.com acquisition, and to possibly adjust for the stronger dollar.... assuming the [SHOP] deal closes by the end of July, we expect FY05 revenues and EBITDA to increase by $60-80M and $10-15M respectively with less than a penny impact on PFEPS.
• Goldman Sachs (7/15) - reinstates EBAY with an Outperform, saying it views the co as one of the top 3 companies in its coverage universe and sees 25%+ appreciation potential to firm's $45 implied value, vs 10% downside. While firm does not expect upside to 2Q05 estimates, it believes investors should buy the stock now with a focus on year-end performance, bucking conventional wisdom that suggests waiting to build positions until after the trough of summer seasonality in August.
• Prudential (7/13) - latest proprietary statistical analysis on eBay suggests that the company will meet, but not exceed, firm's initial expectations for the second quarter of 2005. Based on findings, they are slightly lowering estimate for second-quarter global listings to 441 million (from 442 million); Also maintaining EPS estimate of $0.18, which matches consensus. Although firm continues to believe that eBay's long-term growth prospects are tremendous, the firm remains concerned that slowing growth in the company's largest and most mature markets will reduce investors' willingness to pay a high multiple for the stock. The firm maintains its Neutral Weight but lowers tgt to $38 from $44.
• CIBC World Markets (7/28) - We expect the company to report EPS of $0.19... Our estimate assumes revenue growth of 35% to $1.05 billion, driven by strength in international revenues (+48%) and in PayPal (+45%) as well as a ~4 point contribution from acquisitions (Rent.com, Marketplaats.nl), offsetting slowing growth in the U.S. division (+17.5%)... We expect pro forma operating margins to decline to 34.6% from 35.6% last year... we believe management will remain conservative on its outlook for the 3Q and FY05... For FY05 our EPS estimate of $0.80 factors revenue growth of 34% yr/yr to $4.4 billion (vs. guidance of $4.27-$4.36B) with a 60 bps decline in pro forma operating margin to 34.5% vs. last year
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