SAN FRANCISCO – EBay Inc. (EBAY), the world's largest online marketplace, Wednesday posted a 77 percent increase in quarterly profit, fueled by strong back-to-school shopping and growth in its international and PayPal businesses.
The shares of the highly valued company rose more than 3 percent on the results, as well as its new fourth-quarter revenue outlook.
Nevertheless, eBay's current quarter and 2005 guidance painted a mixed picture, with forecast revenues landing at or above expectations, but with projected earnings falling short of Wall Street's current consensus estimates.
"The guidance is a little concerning. Nothing's fallen off a cliff. It's just a question of what you pay for growth rates," said Janco Partners senior analyst Martin Pyykkonen, who on Tuesday downgraded eBay to "market perform" from "accumulate" on valuation concerns.
Based Wednesday's closing stock price of $91.36, eBay trades at a multiple of 76 times projected 2004 earnings per share. Internet media giant Yahoo Inc. (YHOO), an eBay competitor in several overseas online auction markets, trades at a multiple of 98.5.
EBay shares, which moved to $94.47 in after-hours trade, are up more than 40 percent so far this year.
Profits at San Jose, Calif.-based eBay were $182.3 million, or 27 cents per diluted share, compared with $103.3 million, or 16 cents, a year earlier. Revenue rose to $805.9 million from $530.9 million.
On average, analysts polled by Reuters Estimates had seen eBay posting earnings of 27 cents a share on revenue of $780.8 million.
Revenue from PayPal (search), eBay's online payment unit undergoing an expansion in Europe, rose 56 percent to $166.3 million, while revenue from its U.S. and international businesses increased 29 percent and 82 percent to $330.6 million and $282.3 million, respectively.
EBay, which hosts trading of everything from classic cars to record-setting baseballs, raised its fourth-quarter revenue forecast by $29 million to about $915 million and said it continues to expect earnings of up to 30 cents per diluted share. Analysts, on average, had seen the company posting revenue of $905.7 million and earnings of 33 cents a share.
"I'm feeling very confident about the holiday season and that's reflected in the guidance," eBay Chief Financial Officer Rajiv Dutta told Reuters in a telephone interview.
Dutta said the company did not raise its fourth-quarter earnings outlook because it plans to invest in various areas, such as China, PayPal, infrastructure and security.
He added that the company sees "no material impact" on current quarter revenue or earnings from PayPal outages that for several days this month made it difficult for users to close sales, access information, or withdraw money from their accounts.
Looking to 2005, eBay forecast net profits of as high as $1.42 per diluted share and revenue of up to $4.2 billion. Analysts' average estimate had called for earnings of $1.61 a share and $4.28 billion in revenue.