eBay Inc. (EBAY, Financial), a global technology company provides online platforms, tools and services to help individuals and small, medium and merchants around the globe engage in online and mobile commerce and payments. The Company also generates revenue through marketing services, classifieds and advertising.
Strong Second Quarter Growth
eBay bought PayPal for $1.3 billion in late 2002. PayPal’s growth has taken off in recent quarters. This business is growing at a faster pace and payments rose 20% to $1.95 billion. This comprised about 45 percent of total revenue. Its core marketplaces revenue rose 9 percent to $2.17 billion. This robust business added 4 million new active registered accounts during the second quarter and boasts 152 million registered accounts worldwide.
The San Jose, California-based company said net income increased to $676 million, or 53 cents per share, from $640 million, or 49 cents per share, in the same quarter a year ago. Earnings, adjusted for one-time gains and costs, came to 69 cents per share. Overall revenue climbed 13 percent to $4.37 billion from $3.88 billion in the same quarter a year ago.
The company repurchased 33.1 million shares of its common stock for approximately $1.8 billion in the first quarter of 2014. The company's remaining share repurchase authorization was $3.8 billion as of March 31, 2014.
EBAY’s commerce platform looked stronger and volume increased 26% to $62 billion in the quarter. The company has a market cap of $65 billion. Net profit grew six percent to $676 million or $0.53 per share, from year earlier $640 million, or $0.49 per share. Non-GAAP earnings are expected to increase at a three-year CAGR of 15%–19% and free cash flow is expected to be greater than $11 billion over the same time frame.
For the third quarter, eBay expects earnings excluding items of $0.65 to $0.67 cents a share, on revenue of $4.3 billion to $4.4 billion. The company predicted 2014 adjusted earnings of $2.95 to $3 a share, on revenue of $18 billion to $18.3 billion.
In the last quarter, eBay's operating cash flow stood at $1.2 billion and its free cash flow stood at $968 million. And the company ended the first quarter of 2014 with $11.9 billion in cash and securities on its books.
“We continued our momentum in the four competitive commerce battlegrounds of mobile, local, global and data,” John Donahoe, eBay’s chief executive, said in a statement.
Minor Hiccups
Ebay's stock has fallen more than 8 percent since April, hurt by the cyber attack disclosed in May that compromised data for some 145 million customers, the departure of highly regarded PayPal chief David Marcus, and intensifying competition from both online and offline rivals. Executives said eBay will spend more on measures to entice users back, including coupons, seller incentives and increased marketing.
Future Outlook
EBAY is currently spending heavily on investments and acquisitions, which is a promising sign for future growth. EBAY purchased Braintree, an e-commerce company used by start-ups for mobile payments, and integrated the company into its PayPal division. And ultimately, eBay wants to use Braintree to bring more small and medium-size businesses into the world of online commerce.
eBay expects total revenue to reach $21.5–$23.5billion by 2015, up from $14.1 billion in 2012, driven by continued success in the company’s core businesses.
The company has undertaken strategic initiatives like mobile innovation capabilities, expansion into newer markets to sustain its long-term goals. EBAY is constantly attempting to capitalize growth in the mobile payment business. This is because today consumers prefer mobile browsers for shopping, surfing and entertainment. The company continuously introduces new solutions to enhance the mobile shopping experience and rapid consumer adoption makes this a huge growth opportunity. eBay is very active when it comes to innovation. Also, it has expanded its reach into emerging markets. PayPal’s international expansion will beget huge benefits to the M-commerce company.
To End
It is true that the online payment space is increasingly dominated by entrants in the likes of Amazon (AMZN) and Google (GOOGL), but PayPal has successfully created a significant market niche of its own. The growing customer base creates a far-reaching network this business. EBAY is one of the world’s largest online trading communities with an average of 9.7 million shares traded everyday.
The broader picture looks positive and the full year performance suggests that the company is positioned strongly to leverage the global growth in the e-commerce market.
