eBay on Wednesday posted a 50 percent rise in net profit on strength in its core auction and payments businesses, but left its 2007 outlook unchanged despite Wall Street's hopes for a boost.
Revenue as well as margins for eBay's auction and fixed price marketplaces business grew, with revenue rising 26 percent to $1.29 billion, accelerating from a range of 22 percent to 24 percent growth in the prior four quarters.
"It was a good quarter for the company, highlighted by great results across the businesses," said Meg Whitman, chief executive of the online auction leader. "We feel real good about the rest of the year."
Net income rose to $376 million, or 27 cents per diluted share, from the year-earlier quarter's $250 million, or 17 cents a diluted share. Excluding one-time items and stock option costs, profits were $471 million, or 34 cents per share, compared with $351 million, or 24 cents per share.
Profits edged ahead of consensus forecasts. Wall Street was looking for a net profit, on average, of 26 cents per diluted share, according to Reuters Estimates. Excluding one-time items, the consensus analyst forecast was 32 cents per share.
"We had a nice upside surprise by 2 cents per share versus consensus. It looks like those trends will be flowing through to the second half of 2007," said David Garrity, an analyst with Dinosaur Research in New York.
Overall revenue rose 30 percent to $1.83 billion, the top end of Wall Street predictions. Analysts were looking for revenue, on average, of $1.78 billion, according to Reuters Estimates. Forecasts ranged between $1.71 billion to $1.83 billion.
For the full 2007 year, eBay said it expected revenue of $7.30 billion to $7.45 billion, within the range of existing analyst predictions, but shy of the top end of forecasts.
Forecasts ranged from $7.3 billion to $7.49 billion, according to Reuters Estimates.
But the 2007 outlook marks an increase at the low end from the $7.2 billion to $7.45 billion eBay predicted in April.
For the third quarter, eBay said it expected net earnings per share in a range from 25 cents to 27 cents. Excluding one-time items, it forecast a profit of 31 cents to 33 cents per share. Both figures are in line with Reuters Estimates consensus forecasts of 26 cents and 32 cents, respectively.
The San Jose, Calif.-based company said it expected third-quarter revenue in a range from $1.78 billion to $1.83 billion, also squarely in line with analysts' expectations.
During the second quarter, international revenue grew 37 percent while U.S. revenue rose 24 percent. Active eBay users rose 7 percent to 83.3 million.
Second-quarter net revenue for its PayPal business grew 34 percent to $454 million, fueled by overseas expansion and a 57 percent rise in payment volume in its merchant services business on sites off of eBay.
Whitman reiterated that rival Google Checkout has had little impact on PayPal. Among U.S. online shoppers, three out of four use PayPal while one in three in Britain do so, she said.
Skype, the eBay-owned Web communications service, had 220 million registered users at the end of June, up from 196 million at the end of March. Skype's net revenue rose to $90 million, double the year-earlier quarter's $44 million.
Investors were divided over how much confidence to put in the results.
"eBay has kind of turned the corner now a little bit," said Mike Binger, a portfolio manager with Thrivent Financial and a holder of eBay shares. "For (several) quarters, they were kind of underperforming versus expectations. That process for them has bottomed out."
eBay shares closed at $34.05, down 20 cents in regular-session trading on the Nasdaq. Following the report, the stock initially shot up more than $1 before reversing course and falling to $33.80 in extended trade.
"I am very neutral on the stock and I don't see anything in the release that would change that," said Global Crown Capital analyst Martin Pyykkonen. "The main negative is that (auction) listings were down again this quarter."
The stock is valued at about 24 times Wall Street's consensus forecast for 2007 compared with Google's price-to-earnings multiple of 36 times 2007 forecasts and Amazon.com's multiple of 72 times.