by James Brumley | October 15, 2013 8:50 am
If the professional forecasters are right, eBay (EBAY) is going to report per-share income of 63 cents when it unveils last quarter’s earnings on Wednesday. That eBay earnings figure would be 14% stronger than the profit produced in the third quarter of 2012. EBAY’s year-over-year sales are expected to grow 15%, reaching $3.91 billion.
Fortunately for EBAY stock investors, the pros usually underestimate the online auction company.
Ebay earnings have topped estimates in 10 of the past 12 quarters. Better still, if the company does manage to bring home a profit of 63 cents, that will represent the best Q3 eBay earnings ever, and the second-best quarter in the organization’s history.
On the flip side, if there was ever a quarter to wonder whether eBay earnings could come up short, this is it. Ebay’s only earning miss in years came just last quarter, when the company posted a profit of 63 cents per share vs. estimates of 64. It’s only a penny, but a miss is a miss is a miss. Still, betting against eBay stock hasn’t been a particularly good idea in a long, long time.
Ebay earnings forecast details are academic at this point, however. What’s going to drive the stock higher or lower following Wednesday’s news is perspective on (1) whether the e-payment market that eBay-owned PayPal dominates is hitting a saturation headwind, and (2) future opportunities for overseas growth.
Although its penetration rate has been lackluster, Amazon.com (AMZN) has created a head-to-head threat to PayPal with its very similar “Login and Pay” service. Between new competition and overheated growth rates from the PayPal division in recent quarters, this could be where the company is most vulnerable to a slowdown. It matters, because e-payments make up about 40% of eBay’s total revenue.
Investors need not worry too much about eBay’s PayPal division, though, because emerging markets (China and Russia in particular) are just now becoming viable e-commerce and mobile-commerce opportunities. And, eBay’s mobile payment volume grew 250% in 2012. While a repeat performance of that growth rate is unlikely, the big surge does point to where future growth is going to come from.
Shareholders and would-be investors will also look glean clues regarding further penetration of new geographical markets after Wednesday evening’s eBay earnings report.
China and Russia already have been mentioned as budding hotbeds for the company’s online auction service, but Brazil and India might be even brighter stars. eBay launched its localized website in Russia in the first quarter of this year, and took jumped knee-deep into the Indian market this June with a $50 million investment in similar Indian site Snapdeal.com. All told, eBay believes emerging market e-commerce sales could be in the vicinity of $200 billion per year.
Although overseas sales make up just a tad more than 50% of total revenues for eBay stock right now, strong emerging market revenue growth could widen that foreign-revenue lead in the foreseeable future.
The Q3 eBay earnings report will come after the market’s close Wednesday. The earnings conference call will begin at 5 p.m. EST the same day.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
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