eBay itself is still dead in the water (especially in the US), but PayPal’s rocking.
Imran Khan and Doug Anmuth weigh in on Q3 earnings:
Doug Anmuth, Barclays:
eBay, Inc.: Solid 3Q and Higher 4Q Guide
eBay posted better-than-expected 3Q results with upside across both Payments and Marketplaces. Revenue of $2.25B (+12% organic growth) beat our/Street $2.15B/$2.18B and PF EPS of $0.40 was ahead of our and Street’s $0.37. eBay raised guidance for 4Q10 on both core operational strength and FX, and we believe this was somewhat of a surprise given the mixed macro environment and eBay’s recent 3Q pre-announcement at the high end of guidance.
What We Liked: 1) no deceleration in PayPal’s FX-neutral TPV growth (+29%) and FX-neutral revenue growth (+23%) on 42% Merchant Services growth and acceleration on eBay; 2) International ex-vehicles GMV growth of 8% was above our 7% as European strength offset slower Korean growth related to less couponing; 3) improving Marketplace metrics with sold items growth ex-Gmarket accelerating to 13% and active user growth stable at 4%; 4) increased U.S. liquidity through new European BML funding, $1B CP program, and $1.5B potential debt financing; and 5) $300M in share buybacks and a new $2B authorization.
What Concerned Us: 1) U.S. ex-vehicles GMV growth of 2% met our projection, but U.S. growth is still likely to lag behind eCommerce in 2010 and 2011-the U.S. Marketplace has stabilised, but it is still working through the effects of lower fees from March, increased exposure for SIF listings, search enhancements, and other changes.
Our 4Q10 and 2011 revenue/PF EPS are now $2.47B/$0.47 and $9.87B/$1.81.
We are encouraged by continued strong PayPal growth and stabilizing Marketplace trends, but we maintain our 2-Equal Weight as we look for a stronger Marketplace turnaround. We are raising our Price Target to $27 on 15x 2011E PF EPS of $1.81. Our previous $25 price target was based on 14.5x our previous 2011E PF EPS of $1.74.
Imran Khan, JP Morgan:
Our key takeaways, prior to the 5PM conference call:
- Non-vehicles US GMV up 2% Y/Y. Our incoming model called for a 1% increase, and while the slight outperformance is a positive, we believe the relatively tepid growth suggests eBay continues to lose market share in the US.
- Non-vehicles Int’l GMV up 8% ex-FX. Our forecast was for an 8% Y/Y improvement, compared to 9% ex-FX (and ex-GMarket) growth in 1Q and 2Q. As such, it does not appear the Marketplaces business is experiencing acceleration internationally.
- Marketplaces take rate in line. The take rate was 8.0%, our forecast was for a 7.9% take rate, compared to 7.9% in the year-ago quarter and 8.0% in 2Q.
- PayPal TPV up 26% Y/Y; better than expected. We had modelled a 24% Y/Y improvement. On-eBay TPV was 69.8% of addressable GMV, a solid improvement from 68.6% in 2Q. Merchant Services TPV was up 40% Y/Y (or 42% ex FX).
- PayPal take rate in line at 3.57%. We had modelled 3.57%, and 2Q saw the take rate at 3.60%. PayPal revenue margin was 62.2%, vs. 62.8% last quarter.
- Revenue $2.25B. This compares to our $2.22B estimate and the top end of guidance at $2.18B. Given the previous announcement of results “near the high end of guidance,” this appears to be a positive surprise.
- Pro forma EPS of $0.40. A 3c beat on the EPS line vs. consensus. We had modelled 38c, the high end of guidance was 37c.
- 4Q outlook implies rev. growth 6% to 10%, excl. Communications from 4Q’09 comps. Our estimate was for 12% growth. The company sees 4Q revenue of $2.39B-$2.49B, and pro forma EPS of $0.45-$0.48, compared to consensus of $0.44 and our estimate of $0.45.
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