Ebay nails Q1, but questions remain
Posted
Apr 16 2008, 04:13 PM
by
Kim Peterson
Rating:
Ebay shares have been on a tear for weeks now, rising 25% since mid-March to $32.12. Today we found out why the market was so bullish about the online auctioneer: it had a slam-dunk first quarter in which profit rose 22% and revenue rose 24%. Those numbers handily beat expectations, but there may be a dark cloud in all the good news.
Ebay has rolled out some big changes since the first of the year, including a new CEO that took over in March. The company overhauled its fee structure, charging users less to list items but taking a bigger commission on sales. Ebay also raised standards for sellers and updated its feedback system. The changes drew immediate criticism and fueled a week-long boycott, but the outcry seems to have died down lately.
Ebay saw the number of new auction listings grow in the quarter. Active users on the site increased by 1% -- not a lot but the first increase in a year. The quarter's performance was good enough that eBay raised its full-year outlook, saying today it expects a 2008 profit of $1.70 to $1.75 a share.
But take a look at one key metric. The value of all goods sold on eBay (also known as "gross merchandise volume") grew only 12% from the year-ago period -- less than what some analysts had been expecting. GMV has been stuck at 12% for a couple of quarters now, down from 20% to 30% growth a couple of years ago. If eBay can't jump-start GMV soon, it could be a sign that the auctions business has hit a wall.
And as much as new CEO John Donahoe wants to switch focus from auctions to fixed-price listings, he's going to need solid GMV growth to stablilize the company in the meantime. Fixed-price sales are about 40% of eBay's revenue.
Ebay's bottom line also got a boost from the weak U.S. dollar, since about 53% of its revenue is international, acccording to Jefferies analyst Youssef Squali. He estimates that every 5-cent decline in the dollar year-over-year against foreign currencies adds $27 million in revenue to eBay's coffers.
So eBay got to silence critics and continue its market momentum with today's earnings announcement. But the company is still in a transition and will need to push hard on auctions and other aspects of its business this year.
Ebay is up slightly in after-hours trading this afternoon to $32.31.
On a side note: Remember former CEO Meg Whitman? You might see more of her if John McCain is elected president. McCain this week named Whitman as a possible cabinet member, should he become president. He's also considering Cisco Systems CEO John Chambers and former Hewlett-Packard CEO Carly Fiorina.
