EBay on Wednesday reports its first quarter results and there are many loose ends to tie up. Did the company's changes to listing fees make a difference? Can eBay weather an economic downturn? Can the auction giant get growth going again?
Those are some big questions and eBay's new CEO John Donahoe, who officially took over March 31, isn't going to have all the answers. But we'll at least get some color on eBay's prospects in future quarters. It's been a long two months since eBay cut listing fees, boosted selling standards and dangled carrots in front of sellers to move more volume. The listing changes initially looked bad for eBay--it even faced a boycott that apparently fizzled--but anecdotal reports indicate that the hubbub has died down.
EBay is expected to report earnings of 39 cents a share on revenue of $2.08 billion, according to Thomson Financial. Most analysts expect an inline quarter with a little help from a weak dollar--53 percent of eBay's revenue comes from abroad. In other words, a weak dollar, strong euro and British Pound equates to an earnings bump for eBay. According to Jeffries analyst Youssef Squali every nickel decline year over year in the U.S. dollar against the pound and euro boosts eBay revenue by $27 million. Add it up and Squali figures eBay will get a revenue boost of about $87 million from a year ago.
Citigroup analyst Mark Mahaney said he expects eBay to report better than expected first quarter results.
Among the key issues:
- Listings growth. Squali says that core U.S. listing for eBay gained six of the seven weeks since Feb. 20, indicating that the company finished the quarter in relatively good shape.
- Average selling prices. RBC analyst Stephen Ju notes that eBay's average selling price per item is likely to have fallen due to the listing fee changes that favor cheaper goods. What remains to be seen is whether the decline is worrisome.
- The outlook. Analysts say that eBay will project earnings and revenue in line with consensus estimates for 2008. A weak economy, new management and the listing fee changes mean higher guidance is unlikely.
- Progress of the new management team. Donahoe has highlighted broad goals in enhancing the eBay experience, boosting listings growth and melding the auction and fixed price models. Where does management stand with those goals?
Here's Mahaney's handy cheat sheet ahead of eBay's earnings report: