Ebay Stock Won’t Get a Pop From Earnings

The eBay earnings whisper number suggests it will miss estimates by a wide margin

   

The Ebay (EBAY) earnings report lands Wednesday after the closing bell, and although Wall Street expects solid profit and sales growth, a weak holiday selling season could cause eBay earnings to miss estimates — and that will likely weigh on eBay stock.

eBay ebay stock

The eBay earnings report is projected to show that earnings per share grew to 80 cents from 70 cents in the year-ago quarter. Additionally, the eBay earnings report should show revenue growth of nearly 14% to $4.54 billion, according to Wall Street estimates.

Those are strong figures — especially the sales growth — but the earnings whisper number is actually lower than 80 cents per share because eBay had a relatively weak holiday selling season, some analysts reckon. In fact, the Zacks earnings whisper number puts eBay earnings at just 71 cents per share — a miss of 9 cents. That sure wouldn’t give eBay stock a boost.

A shorter holiday selling season, as well as higher costs, will take the blame. JPMorgan analyst Doug Anmuth told clients via a research report that eBay revenue will likely come up short, as third-party data trackers suggest a slowdown in holiday volume for all general merchandise retailers.

There’s also a chance that the company could pare its outlook as part of the eBay earnings report. Morgan Stanley warned clients that the cut in eBay 2014 guidance could be larger-than-expected.

That said, PayPal is expected to show solid growth, and the Marketplaces business should continue to improve. Furthermore, eBay earnings should show that its streak of at least 10% revenue growth extends to a 12th consecutive quarter.

Ebay Stock Has Been a Dud

If eBay earnings do come up short, it won’t exactly be a surprise, as the earnings calendar has served up an unusually high percentage of companies missing estimates. As of Jan. 17, only 52% of the 52 companies in the S&P 500 reported earnings above expectations, according to S&P Capital IQ. That’s well short of the average of 67% for the last four quarters.

And it’s not as if investors have to worry about an overheated eBay stock dropping sharply on a weak eBay earnings report. Despite showing signs of improvement in all facets of its operations, eBay stock has been a dog for a while. Ebay stock is essentially flat over the last 52 weeks, swinging between $48 and $58 a share. The S&P 500 is up 24% over the same span.

Despite an earnings whisper number that has eBay earnings missing by a wide margin — and expectations of a deep cut to eBay’s outlook — Wall Street remains bullish on eBay stock over the next 12 to 18 months. Of the 42 analysts covering eBay stock, 14 call it a Strong Buy, 17 have it at Buy, and 11 say it’s a Hold. No analysts have slapped eBay stock with a Sell rating heading into earnings.

Ebay stock looks attractively valued heading into the eBay earnings report, fetching 17 times forward earnings with a long-term growth rate of 14%. But if the eBay earnings whisper number comes to pass, eBay stock will get a bit cheaper still.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2014/01/ebay-stock-earnings-whisper/.

©2016 InvestorPlace Media, LLC

Comments are currently unavailable. Please check back soon.