Q3 Preview: eBay (EBAY) Making All the Right Moves for Continued Growth

eBay, Inc. (Nasdaq: EBAY) shares are trading slightly into positive territory Wednesday heading into its quarterly report.

After the market close, eBay is expected to report third-quarter earnings of 48 cents per share on revenue of $2.91 billion. Earnings would be flat from last quarter, and a 20 percent jump from 40 cents per share reported in the same period last year. eBay has bested estimates by an average of 6.25 percent over the last four quarters according to data from StreetInsider.com's EPS Insider, meaning the company might report something similar to 51 cents per share. However, the average beat over the last three third-quarter reports is 7.8 percent, leading to potential earnings slightly higher.

eBay shares fell 8.6 percent through the quarter and are up 15 percent since. The stock is trading nearly 22 percent better on the year. eBay has traded within a range of $25.13 to $35.35 over the last 52-week time frame.

The stock is trading with a forward P/E of 14.6x next years earnings expectations, compared with 73.9x at Amazon (Nasdaq: AMZN) and 19.5x for Yahoo! (Nasdaq: YHOO).

Data from Bloomberg has 17 analysts with a Buy rating, 12 at Hold, and 1 with a Sell. The Street price target average is $39.40 with a low of $21 and high of $48.

Analyst Comments

• JPMorgan sees earnings of 48 cents with revenue of $2.93 billion. JPMorgan cites data from ChannelAdvisor which suggests "eBay's US same store sales grew in the midhigh teens Y/Y in 3Q, a notable acceleration from ~13% Y/Y growth in 2Q. We are currently modeling 3Q11 US ex-vehicles GMV growth of 14% Y/Y, roughly flat from 2Q, suggesting there may be room for upside to our numbers."
  
  On PayPal, JPMorgan sees TPV growth of about 30 percent with revenue growth of 32 percent. Results will be driven by Bill Me Later and acquisitions in payments marketing services. PayPal should continue to benefit from increased merchant adoption, user growth, and greater usage per active user.
  
  
• Wedbush is modeling for earnings of 50 cents per share and revenue of $2.92 billion. The firm is bullish on PayPal Access as well as Facebook's Open Graph integration. Additionally, recent demonstrations point to PayPal Wallet being more successful than Google Wallet, according to Wedbush.
  
  
• Benchmark is looking for earnings of 48 cents per share and revenue of $2.97 billion. Benchmark noted comps accelerated in the third quarter, according to ChannelAdvisor data. The firm is estimating, "3Q11 US eCommerce growth of 11%, which reflects an estimated 10% growth in September. US eCommerce growth of 10% in August followed 14% y/y in July, according to comScore. Categories of strength aiding eBay in 3Q11 should be apparel, auto parts and consumer electronics."
  
  Benchmark believes "categories of strength aiding eBay in 3Q11 should be apparel, auto parts and consumer electronics."
  
  
• BGC is looking for earnings of 50 cents per share, above Street views, and revenue of $2.946 billion. BGC is modeling for "gross merchandise volume (GMV) ex-auto of 15.1B with fixed price format accounting for 63% of transactions. GMV growth estimate is 20% YoY and 3% sequentially. Marketplace revenue is estimated at 1,682M and 57% of total, representing 19.2% YoY growth and 1.2% sequential growth. Payments revenue is estimated at 1119M and 38% of total, representing 33.6% YoY growth and 4.4% sequential growth. Total payment volume is estimated at 29.604B, growth of 3% sequential and 32.4% YoY."
  
  BGC said, for Marketplace, while velocity has improved, average selling price has been a drag on growth in the segment. BGC sees eBay implementing changes to focus shoppers on higher ASP items. BGC is positive on other efforts, including, "1) new loyalty programs such as eBay bucks are effective in driving repeat usage, with over 3M members spending 5x those not enrolled, 2) the focus on front-name new items at liquidation prices should continue to resonate with a consumer that is still repairing their personal balance sheet, 3) there are markets such as the U.K where eBay is taking share from competitors, and 4) the marketplace is positioned to benefit from augmented reality and the blurring of offline and online retail experiences that is driven by smartphones."

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out eBay's past performance at Streetinsider's eBay Income Statement.

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