eBay Beats Street, Raises 2001 Expectations

Once again, eBay posted substantially higher earnings per share (EPS) than analysts had predicted, announcing Thursday that net income for its second quarter 2001 was US$180.9 million, or 12 cents per diluted share. The earnings beat analyst predictions by 3 cents.

eBay's gross merchandise sales grew by 14 percent in Q2, with online net revenues rising by 15 percent. The company also raised its gross profit to $148.0 million, or 82 percent of net revenues during the quarter.

"Our job as management is to balance the growth rate of the company with near-term investments to propel our long term growth," eBay president and chief executive officer Meg Whitman said. "There is no shortage of great opportunities that will continue to drive the growth rate of the company as we move forward."

In addition, eBay raised both its revenue and profit guidance for the remainder of 2001. eBay said it now believes that consolidated net revenues in the second half of 2001 could be as much as $15 million to $30 million higher than previously indicated, or as much as $385 million to $400 million in net revenues for the remainder of 2001.

Chugging Along

eBay has beaten analyst predictions every quarter of the past year. Over the past several days, analysts raised their earnings estimates and price targets for the company, boosting shares of eBay to over $67. However, eBay stock fell Thursday by the close of trading, dropping $2.14 to close at $64.40.

"Our job at eBay is straightforward, to expand our business in new markets, while improving on our current services," eBay chief operating officer Brian Swette said. "The faster we expand our platform, the more business our community can transact."

Whitman pointed to the company's fixed-price formats, including its Buy It Now service, and expanded offerings on Half.com, as a primary driver for the quarter's success . Half.com added millions of new items across four main categories in Q2: computers, consumer electronics, sporting goods and trading cards, eBay said.

Going Global

Analysts are paying particular attention to eBay's international numbers, thanks to eBay's lofty goal of growing its revenue to $3 billion by 2005. eBay currently has international operations in 18 countries and completed its acquisition of European online trading network iBazar S.A. in May.

eBay's international operations now account for 14 percent of the company's net revenues, up 2 percent over Q1. Whitman said the success of eBay's German and UK sites was indicative of the enormous potential for eBay overseas.

With $193 million in Q2 gross merchandise sales , eBay Germany now conducts the same level of trade eBay showed as a whole in its 1998 third quarter, Whitman said. In addition, eBay's UK site, which grossed $42 million sales, now has revenues estimated to be double that of next largest British competitor.

Whitman added that eBay expects Korea, Italy and France to be the next three biggest international successes for eBay.

Major Initiatives

In June, eBay launched a two-week pilot test of its much-anticipated storefronts project, known as eBay Stores. The test involved sellers dealing in musical instruments, jewelry, electronics and collectibles. Approximately 18,000 merchants have signed up for the initial pilot program.

"It's really too early to tell how big, how meaningful and how successful this will be," Whitman said.

Earlier this month, eBay struck a deal with luxury gift e-tailer Ashford.com, enabling the company to sell its leftover and closeout merchandise on the auction site.

The auction site also recently announced a new alliance with Terra Lycos (Nasdaq: TRLY). The deal calls for eBay auctions to be integrated into the Lycos auctions site and will make eBay a featured advertiser on the Lycos network.