eBay Inc (EBAY) Q4 Earnings: What To Expect

ebay

RBC Capital Markets analysts Mark S. Mahaney, Andre Sequin, Brian Peak and Kevin Potterton rate eBay Inc (NASDAQ:EBAY) as Outperform as the e-commerce giant is set to report in-line fourth quarter earnings on Wednesday, 22nd Jaunary.

We expect eBay Inc (NASDAQ:EBAY) to report Q4 results on Wednesday January 22. We are looking for $4.55B in revenue and $0.81 in pro forma EPS. Our revenue and pro forma EPS estimates are largely inline with consensus of $4.56B and $0.80, respectively, and with company guidance. Also, we believe that the Street’s current expectation for 16% EPS growth in 2014 to $3.13 might be a tad aggressive. We think a conservative range of high-single-digit to mid-teens % EPS growth might be the most likely outcome.

Intra-quarter data points

1) Slightly negative comScore US web traffic trends – QTD Q4 US unique visitor growth was down 4% Y/Y, remaining flat vs. the 4% Y/Y decline seen in Q3, on a 1pt easier comp. Traffic to eBay Inc (NASDAQ:EBAY)’s main site (eBay.com) fell 5% Y/Y, also flat vs. Q3 – we believe the shift to mobile usage is a significant factor here, as the comScore data only track desktop traffic. 2) Negative channel advisor SSS data – eBay posted average SSS growth of 12% Y/Y in Q4, down from 19% in Q3 – implying a deceleration in Q4 – inline with our Q4 eBay US GMV Y/Y growth (exauto) estimate, which is projected to grow 12% Y/Y in Q4, down from 15% growth in Q3, on a 3pt tougher comp.

Key factors to focus on

In addition to the Q4 revenue and pro forma EPS results – as well as the Q1 and FY14 guide – we believe the key factors to focus on will be: 1) Marketplace GMV, revenue, and margin trends – We are looking for consistent 42% segment margins and 12% Y/Y growth in US GMV (ex-autos). 2) Payments TPV, revenue, and margin trends – We are looking for 24% segment margins and a continuation of mid-to-high 20%s Merchant Services TPV growth (ex-FX). 3) GSI revenue and margin trends – We are looking for 20% segment margins and 8% Y/Y segment revenue growth.

eBay’s valuation

Our price target is based on a 17x P/E multiple on our 2015 EPS estimate of $3.45. We continue to view the eBay Inc (NASDAQ:EBAY) core long thesis as intact – we still believe it has enough momentum in its current markets, growth potential in those markets, new investment initiatives in place, and execution competence to consistently deliver at least low-teens EPS growth. And that should provide a lot of valuation support here, with the shares trading at a 17x P/E. Broadly, eBAY presents as a unique combination of a secular growth cash cow businesses (marketplaces), a very strong growth solid margin business (online payments), an option play on hyper growth alternative payments (offline payments), with sustained shareholder focus (share repos).



About the Author

Sheeraz Raza
Sheeraz is our COO (Chief - Operations), his primary duty is curating and editing of ValueWalk. He is main reason behind the rapid growth of the business. Sheeraz previously ran a taxation firm. He is an expert in technology, he has over 5.5 years of design, development and roll-out experience for SEO and SEM. - Email: sraza(at)valuewalk.com