EBay: Q4 2013 Earnings Preview

Ebay Q4 2013 earnings preview

The excitement of the earnings season is back as a number of companies are set report their December 2013 ending quarterly results during this week. A couple of internet companies will be announcing their results tomorrow (Jan 22nd), after market close. Following our yesterday’s coverage of the earnings preview of Netflix, today we focus on eBay’s (NASDAQ:EBAY) upcoming Q4 2013 earnings.

Historical performance

eBay has grown its revenues at a steady pace over the last twelve months. The company registered a 15.2% Y/Y growth in revenues over the Last twelve months, with the total revenues for the period crossing $15 billion. The chart below shows eBay’s revenues by segments.

eBay revenue by segment

It can be seen clearly that the Payments as a percentage of the total revenues has seen marginal increase, as this was the fastest growing segment over the last twelve months. The chart below displays the segmental growth of the various segments of eBay.

EBAy revenue growth by segment

The PayPal segment is clearly the fastest growing segment for eBay. The completion of the Braintree acquisition could further accentuate the growth of this segment.  It will be interesting to see Braintree’s impact on this segment in Q4 2013.

eBay Profitability

The profit margins of eBay have stayed almost stagnant with the operating margin registering a 18 basis point improvement over the year ago quarter. The average operating margin over the last twelve months was 20.75%, a pretty fat margin compared to industry peers like Amazon and Overstock. The addition of Braintree, a mobile focused payment gateway, will result in synergies which can help boost the profit margins of the company over the coming quarters.

eBay profit margin

 Q4 2013 Guidance

Any preview would be incomplete without looking at the company guidance. The management has provided the following guidance for Q4 2013.

Low end High end Midpoint Y/Y change
Revenue (in millions of $) 4500 4600 4550 14.06%
GAAP EPS ($) 0.67 0.69 0.68 19.3%
Non-GAAP EPS ($) 0.79 0.81 0.80 14.3%

At its midpoint, the revenue guidance represents a Y/Y gain of 14.06% over Q4 2012 and the FY revenues of $16.05 billion will be on the lower end of the management’s FY 2013 guidance.

Conclusion
We expect the company to come out on higher end of its revenue guidance for Q4 2013. The company has reported marginal improvement in profits and significant revenue growth over the first three quarters of 2013. However, EBay stock price is 4.7% down from April 16th 2013, the day it reported Q1 2013 results. The improvement in fundamentals has not been accompanied by any price increases, making eBay stock an attractive investment option at its current valuation levels. The payments segment and impact of Braintree on the same will be a key point in the Q4 earnings call. While we stay cautiously optimistic on eBay, a clearer picture will emerge after Q4 results. Stay tuned to read our latest coverage of the actual Q4 2013 numbers and our post earnings updated outlook on eBay.

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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