Wall Street Watch Thursday: eBay Keeps Bidding Its Earnings Up


The market wasn't wowed by eBay's (EBAY) latest quarter, but the online marketplace giant still posted solid results.

Third quarter revenue climbed 15% to $3.4 billion. Adjusted earnings inched 14% higher to $0.55 a share. The showing was generally in line with what Wall Street was expecting, but let's crack open the company's house of verbs.

Yes, this is eBay. It's also the company behind PayPal, and it owns a small stake in Skype after selling most of its position in the online communications platform to Microsoft (MSFT).

PayPal has been the star at eBay in recent years, and Wednesday afternoon's report didn't disappoint on that front. PayPal closed out the September quarter with 117.4 million active registered accounts, 14% ahead of where it was a year earlier. More importantly, a whopping $35.2 billion in transactions passed through PayPal during the last three months, 20% more than what PayPal was facilitating a year ago.

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What does it mean when payment volume is growing faster than account growth? Well, that's good. It means that registered users are relying on PayPal to close more of their transactions.
eBay's namesake auction website and marketplace businesses aren't growing as quickly as PayPal, but they are moving in the right direction. Marketplace revenue grew 9% during the quarter.

Encouraged by a solid quarter eBay is now bumping its guidance for all of 2012 higher. eBay is now targeting an adjusted profit of $2.32 a share to $2.35 a share on $13.95 billion to $14 billion in revenue. That's pretty much where the pros are perched right now, but it's good to see that eBay isn't expecting any unpleasant surprises as we head into the holiday shopping season.

Other Things Worth Watching

• American Express (AXP) -- a company that's finding itself butting heads with PayPal more and more as eBay's division begins popping up at more retail establishments -- also reported financial results after Wednesday's market close. It wasn't very impressive. Revenue and earnings climbed a mere 4% and 1% respectively. What's that old Amex tagline? Don't leave home without it? Well, American Express appears to have left without growth. This is slowest growth that the company has experienced in nearly three years. Are card members simply swiping less or have they moved on to competing platforms? We'll know more as more credit card companies report in the coming days.

• Europe is still a bit of a mess, but things may be finally starting to stabilize overseas. The euro actually hit a one-month high against the U.S. dollar in Wednesday's trading, and in a welcome development credit rating agency Moody's simply reiterated its rating on Spain instead of lowering it to junk status. Muy bueno.

Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Microsoft. The Motley Fool has created a bear call spread position on American Express. Motley Fool newsletter services have recommended buying shares of eBay, creating a synthetic covered call position in Microsoft and creating a write covered strangle position in American Express.

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