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EBay Shares Jump on Solid Fourth-Quarter Earnings

Reuters
Thursday, 25 Jan 2007 | 12:14 PM ET

Shares of online auction giant eBay surged after the company beat quarterly earnings forecasts, and its chief executive told CNBC the company's annual performance was boosted by a strong fourth quarter and improving fundamentals.

"2006, I think in many ways, was a pivotal year for eBay," said CEO Meg Whitman, appearing on CNBC's "Squawk on the Street" on Thursday. "We started out strong, had some challenges in the middle of the year that we overcame, and ended strong."

EBay reported fourth-quarter results on Wednesday evening that beat Wall Street expectations on an apparent stabilization of growth for its auctions business.

"The core underlying health of the market was very, very strong, not only in the United States but also in Germany and the UK," Whitman told CNBC.

Some analysts also cited the company's 2007 earnings view, which was at the high end of estimates, as grounds for renewed optimism for the stock.

eBay Earnings Beat the Street
eBay CEO Meg Whitman discusses her company's impressive earnings with CNBC's Erin Burnett

"For the first time in five quarters, management's guidance was above the consensus estimate," wrote Prudential Equity analyst Mark Rowen in a research note. "It appears that the
core business is turning the corner ... We continue to believe that eBay's long-term growth prospects remain quite robust."

Rowen reiterated an "overweight" rating on the shares and a $40 price target.

EBay executives said some of the growth stemmed from steps the company has taken to trim the number of product listings consumers see when searching on its Internet auction, helping buyers find what they want more easily.

Yet some analysts remained skeptical the results merited a major reentry for the share.

"Though the outperformance was modest given the relatively low expectations heading into the event, it was outperformance, all the same, and offered very faint signs that facets of
eBay's business may finally be stabilizing," wrote Cantor Fitzgerald analyst Derek Brown, who rates the share a "sell" but raised his price target to $29 from $25.

"Nonetheless, it is not yet clear to us that eBay has fully 'righted the ship' or fundamentally altered the tone/trajectory of its business," he said.

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