EBay beats estimates and revenue soars
Published: 19 Jan 2001 09:23 GMT
EBay reported Thursday that fourth-quarter revenue increased 81 percent and posted earnings that beat analyst expectations.
Pro forma net income for the quarter was $25m (£17m), or 9 cents per diluted share, on revenues of $134m. That compares with earnings of $5.1m, or 2 cents per diluted share, on revenues of $73.9m in the same period in 1999. Analysts expected eBay to earn 7 cents per share, according to a survey by First Call.
At the close of regular market trading, eBay shares were up $3.63, or more than 8 percent, to $46.88 on the Nasdaq. The earnings report was issued after the close of regular trading. In after-hours trading, eBay shares were up $3.37 to $50.25 on the Island electronics communications network. "We are extremely pleased with the strength of our business and with the tremendous momentum we have going into the new year," company chief executive Meg Whitman said in a statement.
Noting that the company is trading at about 130 times its projected earnings for 2001, Merrill Lynch financial analyst Henry Blodget said the company's earnings reports this year will be closely scrutinised by investors. If the company's gross merchandise sales or revenues do not meet expectations, the company could take a big hit in its stock price, he said. "They have to be solid, there's not big room for error," Blodget said.
One of the important things for eBay is how successfully it can move its auction business into new areas, said Steve Fitzgibbons, a financial analyst with J.P. Morgan H&Q. Although areas such as automobiles and local trading show potential, they have grown slower than expected, he said. "The big question is how big can this commerce platform become over time," Fitzgibbons said. "If all the things they're getting involved in work, this has the potential to be an enormous company, but we're not quite there yet."
EBay's gross merchandise sales -- the value of all the goods and services traded on eBay -- reached $1.6bn during the quarter, up 79 percent from the same period in 1999. Deutsche Bank Alex Brown analyst Jetil Patel, who projected that eBay would post $1.5bn in gross merchandise sales for the quarter, said he was impressed with the company's showing.
"The concern that people had was that the numbers were slowing, that their business was slowing in general," Patel said. "I think they've put those fears to bed. This is a pretty impressive performance in a pretty tough industry environment."
EBay added 3.5m new members during the quarter, bringing its total number of members to 22.5 million. At the end of the fourth quarter in 1999, the company had about 10 million members.
EBay's gross profit margins improved significantly during the quarter, going from 71 percent of sales in the year-ago quarter to 82 percent of sales in the fourth quarter 2000. Gross profit margins represent the difference between what a company charges customers for its goods and services and what it pays suppliers for those goods and services. After a series of site outages in 1999, eBay invested heavily in technology to improve site stability -- that investment depressed the company's profit margins.
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