EBay Meets Street But Tumbles on Growth Worries

As expected, eBay met estimates in what is turning out to be a mostly positive earnings season. The company reported first-quarter earnings that were more than double what it booked in the year-ago period.

The auction giant’s first-quarter profit totaled US$47.6 million, up from $21.1 million in the same quarter last year. Revenue swelled from $154.1 million a year ago to $245.1 million, a 59 percent increase.

Despite the positive tone of eBay’s report, however, investors were not convinced that the company’s growth streak will continue. EBay shares slipped $1.89 to $53.04 before market close Thursday and continued declining in after-hours trading.

Expanded Auction Business

EBay has expanded its online auction business to include a wide variety of categories, from trading cards and videotapes to art and antiques. While the economy has sagged, the auction site has remained popular among buyers and sellers.

Although all auction categories did well in the first quarter, according to eBay, top performers included eBay Motors, Computers, Consumer Electronics, Book/Movies/Music, Collectibles, Sports, Toys, Clothing & Accessories, Jewelry & Gemstones and Antiques & Art.

“It’s just a strong indication that consumers aren’t slowing down online spending and consumers aren’t going to go anywhere,” Yankee Group analyst Rob Lancaster told the E-Commerce Times.

Strong Momentum

In fact, eBay’s 17-cents-per-share showing, up from 8 cents per share in the first quarter of 2001, topped analysts’ predictions of 16 cents per share.

“The company’s focus and ability to execute allowed us to deliver record revenues and record profitability for the quarter,” said Meg Whitman, president and CEO of eBay. “These results demonstrate that the momentum in our core transaction business is stronger than ever.”

The company said gross profits totaled $203.8 million and accounted for 83 percent of net revenue in the first quarter. Online transaction revenue, not counting third-party advertising and end-to-end services, grew 65 percent year-over-year to $213.7 million.

Upbeat Outlook

EBay added that it expects to have a positive second quarter and fiscal year, coming in on the high side of its earlier predictions. The company predicted it will book an estimated $1.1 billion in revenue, or 73 to 75 cents per share, for all of 2002.

“Like online advertising, [there are] some problems with the model. But more and more consumers [are] going online every day, and as they are becoming more comfortable, [online sales] are going to increase,” Lancaster said.

Indeed, eBay added 4.6 million confirmed users this quarter — and eliminated 1 million user IDs — reaching a total of 46.1 million users. That figure represents a 55 percent increase from the same quarter last year, when the company reported it had 29.7 million users.