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eBay Earnings Preview: Q2

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eBay Inc (NASDAQ:EBAY) is scheduled to report its quarterly financial results on Wednesday, July 17 around 2:00 PM, Pacific Time.


Analysts at Morgan Stanley Research believe that the financial performance of eBay Inc (NASDAQ:EBAY) for the second quarter of the current fiscal year, will serve as a confidence builder given the recent concerns that the company’s financial guidance for 2013 was too high.

Scott Devitt, equity research analyst at Morgan Stanley (NYSE:MS) projected that eBay Inc (NASDAQ:EBAY)’s earnings results will meet consensus expectations. According to him, the financial performance of the e-commerce company will reaffirm its outlook for the full year. The company expects to achieve a 12 percent to 15 percent year-over-year revenue growth and between $0.61 to $0.63 earnings per share (EPS) for the second quarter.

eBay Capable Of Delivering

According to Devitt, eBay Inc (NASDAQ:EBAY) is capable of delivering towards the high-end of its guidance based on the data from comScore and channel advisors, which showed that the company experienced modest acceleration in year-over-year growth from the previous quarter.

The analyst estimated that the company ex-auto GMV growth at 14.5 percent compared with its 13 percent y/y growth in the first quarter. Devitt projected that PayPal will grow by ~22 percent and the total e-commerce merchant volume will increase by 10 percent, but he believed that the revenue growth for the segment will be flat because eBay Inc (NASDAQ:EBAY) lowered its take rate to drive volume.

2013 Guidance

Devitt emphasized that the fiscal 2013 guidance of eBay Inc (NASDAQ:EBAY) of $16 billion to $16.5 billion revenue (14 percent to 17 percent Y/Y growth) and $2.70 to $2.75 EPS (14 percent to 16 percent Y/Y growth) is a clear demonstration that the company’s financial results for the second half of the year will increase. According to him, the company expects growth from site enhancement and holiday executions.

The analyst recommended an overweight rating for the shares of eBay Inc (NASDAQ:EBAY) with a $62 price target, which reflects 11x/20x 2014e adjusted EBITDA/EPS. Devitt’s valuation also include key risks such as decelerating GMV growth, competition from emerging payment innovations, and inability to execute on omni-channel initiatives as the company integrates its recent acquisitions.

The stock price of eBay Inc (NASDAQ:EBAY) is slightly up at  around $56.55 per share on Tuesday morning in New York.

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