BII Express: eBay Earnings Preview

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eBay Earnings Preview
eBay reports earnings tonight after the close. Here’s what to watch out for:

  • Street consensus expectations are of $3.32B in revenue and $0.57 in pro forma EPS, which are within eBay’s guidance range.
  • eBay’s marketplace business probably had a strong quarter. The marketplace business has started growing again after suffering declines. Third-party traffic measures point to good growth. “The average number of Unique Visitors to in the U.S. increased 11% Y/Y in Q4, roughly in-line vs. Q3ds 11% Y/Y increase but a marked improvement vs. the Y/Y declines reported during 6 out of the 8 prior quarters. The key context here is that Q4:10 traffic trends indicated a positive inflection point vs. the consistent 4%-6% Y/Y declines during the prior four quarters,” writes Citi analyst Mark Mahaney. In other words, it seems eBay’s marketplace business has conclusively halted its decline and is now steadily growing again. More broadly holiday ecommerce sales were strong so eBay probably benefited
  • The macro environment probably limits upside. The crappy economy, particularly in Europe which is a big market for eBay, and the sliding dollar, are probably going to weigh down on earnings. 
  • PayPal is doing great. PayPal is a fantastic business with strong barriers to entry. It should grow 30% Y/Y in Q4, says Benchmark analyst Frederick W. Moran. What’s more, initiatives like Xcommerce (integrating PayPal into third-party apps and products) and mobile payments (growing like gangbusters) are helping.
  • PayPal needs to find a successor for its outgoing president Scott Thompson, though. Thompson was poached to become CEO of Yahoo and is a very well-regarded executive with a very good track record at PayPal. Right now eBay is looking for a successor. This is a key question for the future, so look for questions on that on the call.

In other news…

Jerry Yang quits Yahoo’s board! At long last. Yang needs to be applauded for co-founding a $20 billion company and being one of the great web 1.0 entrepreneurs. He overstayed his welcome, though. Hedge fund manager and Yahoo long Eric Jackson thinks Yang’s departure portends many more announcements from Yahoo’s board and perhaps, finally, decisive action on Yahoo’s strategic issues. 

Chegg, a highly successful textbook rentals company, has launched a mobile reader for digital textbooks, preempting a widely expected Apple announcement. Chegg is very popular on college campuses so they clearly have a shot here. Here’s our take on Apple’s widely-expected digital textbooks announcement →

Apple will ship 48 million iPads in calendar 2012, projects Sterne Agee analyst Shaw Wu. He says the big-sounding estimate may yet turn out to be conservative, largely because he expects the iPad 3update to be huge.

Amazon may introduce cloud search tomorrow, according to a report by trade publication Pando Daily. This would allow site owners to create a search for their own website. Most current solutions, including Google’s, suck, and site owners could quickly be up and running with Amazon because many of them already have their databases running on Amazon’s cloud.

The hours of video consumed on Xbox Live increased 140% in 2011, according to BMO Capital Markets analyst Edward Williams.  The number of Xbox Live users accessing entertainment apps increased almost 50% in November to December alone. This underscores the potential of the ‘connected TV’: consumers are eager to easily access quality content and are not particular about where it comes from.

RIM may be angling to sell its business to Samsung.This would be great news for the struggling mobile manufacturer, and shares of RIM were already up after the rumours spread. Earlier, we predicted RIM would likely be acquired this year– see our other 2012 tech predictions here. →

Facebook earns 23% more per impression than at the start of 2011, according to a new report from TBG Digital. Prices for ads are rising because user growth (supply) has plateaued in their core markets, while demand for Facebook ads from companies has surged. The increase is also due in part to better ad performance and in part to Facebook increasing the price of ads that take users off the site.

Twitter is growing at a rate of 11 accounts per second, and will soon hit 500 million accounts. That sounds like a lot, and shows that it’s growing faster thanFacebook did, but many of those half a billion accounts are spam or abandoned. Still, we think Twitter is quietly building a huge business: read our earlier report here. →

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