EBay Q1 2014 Preview: Focus On Payments

  • eBay is scheduled to report its Q1 2014 results on April 29 market hours.
  • The current consensus estimates is earnings per share of 67 cents on revenue of $4.27 billion.
  • We reiterate our positive outlook on the stock and view eBay as an attractive investment option in the e-commerce space given the strong earnings focus and cash flow consistency of the company.

EBay Q1 2014 earnings preview

EBay Inc. (NASDAQ:EBAY) is scheduled to report its Q1 2014 results on April 29th after market close. eBay has been a regular feature in the news ever since the Q4 2013 earnings call, largely due to the calls from Icahn to separate the marketplace and payments segments. The two have reached a settlement of sorts appointing David Dorman to the board of eBay. We, at Amigobulls have believed that eBay is among the few tech companies which fit the bill of value stock. Today, in our EBAY Q1 2014 earnings preview, we look at what to expect from the e-commerce service provider in its upcoming earnings release.

eBay: Solid fundamentals, attractive valuations

Solid fundamentals and an attractive valuation best summarize eBay Inc. in a sector space shared with the likes of Amazon and Overstock. The topline growth has been pale in comparison to Amazon, but eBay’s strong focus on profitability makes eBay a far more reasonably valued enterprise vis-à-vis Amazon. The last quarter performance of the company was in-line with expectations with modest topline growth and marginal margin expansion leading to earnings growth ahead of expectations. The fact that eBay generates significant earnings growth (+16% Y/Y in Q4 2013) in a sector where earnings growth has far been forsaken itself tilts the scales of a value investor in its favor. A re-look at the last quarterly performance will provide an indication of what to expect from the San Jose based e-retailer.

The payments segment has been the fastest growing segment at eBay for the last few quarters, registering a 19% growth in Q4 2013. This segment contributed close to 40% of total Q4 2013 revenue, which was up from 39% in Q4 2012.

EBAY segmental revenue

The focus will continue to be on this segment as it has clearly been the fastest growing segment at eBay. The spotlight on this segment will be even higher given the numerous media reports surrounding Icahn’s claims for a divestiture and the potential of the segment to drive value for the eBay shareholders.

Estimates of the street

The current Q1 2014 consensus estimate for eBay is an EPS (earnings per share) of 67 cents on quarterly revenue of $4.27 billion. The consensus estimate implies a Y/Y earnings growth of 6.3% on a 12.8% Y/Y growth in revenues. The company has trumped analyst consensus estimates in 10 out of the last 12 quarters, with an average earnings surprise of 2% over the last 12 quarters.

Conclusion

The payments segment will continue to drive growth at eBay, even as the expansion of eBay’s GSI enterprise division could further drive growth rate over the coming quarters. The impact of the expansion will be negligible on Q1 numbers but it will be interesting to see the management’s strategy for further expansion of the enterprise segment. Based on the earnings history, we expect a strong quarter, marginally ahead of analyst estimates for eBay. We reiterate our positive outlook on the stock and view eBay as an attractive investment option in the e-commerce space given the strong earnings focus and cash flow consistency of the company.

To see eBay’s latest stock price movement, click here (NASDAQ:EBAY)

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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