EBay Surprises Street With Solid Report, Stock Up After Hours

E-commerce giant eBay (EBAY) beat Wall Street expectations Wednesday with a solid earnings report, powered by growth in PayPal, its core marketplaces unit and the sale of 70% of Web-calling service Skype. The results, which were helped by a better-than-expected holiday shopping season, are a nice boost for a company that has taken a beating lately from rival Amazon.com -- as well as skeptical analysts."We delivered a strong fourth quarter with double-digit revenue growth driven by exceptional performance at PayPal and turnaround progress and momentum in our core eBay business," eBay President and CEO John Donahoe said in a statement.

The one sour note was the company's basically flat earnings guidance for 2010, which indicates the firm still has much to do to complete its "turnaround." Still, investors liked what they heard, pushing eBay's stock price up over 2% in post-bell trading, after it fell 4.43% during regular market action.

"While these results do not mean that a turn-around in the core marketplace is assured, they do show that progress is occurring and that best practices from Europe could help revive the marketplace more broadly in 2010 and beyond," Broadpoint AMTech analyst Ben Schachter wrote in a note to clients. "We expect that the stock will drift higher over the coming months as bulls continue to point to positive momentum in both payments and the marketplace."

'Excellent Growth in PayPal'

"The company has come a long way over the last year," Scott Kessler, an analyst at Standard & Poor's, told Bloomberg minutes after the report. "They've benefited from both a much healthier global economy and a pretty strong holiday shopping season for online retail."

EBay's solid quarter was propelled by PayPal's strong performance. "PayPal significantly expanded its presence globally and, for the first time, processed more than $20 billion in total payment volume in a quarter," Donahue said. PayPal revenue, together with the Bill Me Later service, grew 28%, to $795.6 million.

In another encouraging sign, revenue from eBay's core e-commerce business increased as well, up 15% to $1.5 billion."We see that e-commerce continues to gain share versus offline retail, and we participate in a large and growing market where there is going to be lot of opportunity for multiple winners," Donahue said on a conference call after the release.

Skype Deal Generates $1.4 Billion

Donahoe said the company had booked a net gain of $1.4 billion from the sale of 70% of Skype to a consortium of private investors. The sale was delayed by a soap opera involving Skype's founders, but the deal finally closed in mid-November.

"This move allows us to focus on our two core business, payments and marketplaces," he said, adding that eBay is "cautiously optimistic about slow steady progress on the global economy." Referring to the mobile space, Donahoe said "We're going to be all over it."

The company reported revenue for last quarter of $2.37 billion, up 16% year over year, and higher than Street estimates of $2.29 billion. At earnings-per-share of 41 cents, eBay beat analyst expectations by one cent. For the first quarter of 2010, the company offered guidance of 39 cents per share to 41 cents per share, in line with Street estimates of 40 cents. For the full year, eBay is looking for earnings-per-share of $1.63 to $1.68, slightly higher than Street estimates of $1.60.
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