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eBay May Have Finally Bottomed

Investors needed to get a sign from eBay that business may in fact be bottoming, and that message was delivered pretty clearly with the company's second quarter earnings report. While the company isn't quite out of the woods, there are pretty good signs that it continues to work its way through them.

The company beat EPS estimates by a penny, reporting 37 cents versus the 36 cent consensus, on slightly better than expected revenue of $2.1 billion. Analysts anticipated just under $2 billion.

But the good news can be found in the company's key metrics and its third quarter guidance: The company's Payments unit, home to PayPal, saw an 11 percent jump in business against the 7 percent anticipated; Marketplace revenue was expected to decline, but the 14 percent drop eBay reported was much slimmer than the 18 percent slide Wall Street expected; and the Communications division, home to Skype, soared, up 25 percent, or almost twice as good as analysts anticipated.

Looking out to the company's third quarter, eBay expects an EPS range of 34 to 36 cents, right in the line with the 35 cents analyst projected, on $2.05 to $2.15 billion, which is better than the $2 billion consensus.

eBay closed today at its high for the year, and this report only accelerated those gains with the company jumping 6 percent after the release hit the tape.

Citi's Mark Mahaney anticipated a "trough" quarter and with business in some key units performing better than expected, along with an increase in outlook seems to prove that point.

But competitors aren't sitting still. After the bell tonight, rival Amazon announced an $807 million acquisition of Zappos.com, an online shoe retailer that just a couple of months ago announced plans to dramatically expand its online offerings so it could go head to head with Amazon. Seems like Amazon didn't want to take any risks, and launched a take-out instead. But it's that kind of move that cuts to the core of the differences between eBay and Amazon with the latter's pack-and-ship model still seemingly far more compelling to customers than eBay's patchwork of millions of small businesses selling good on the online marketplace.

Meantime, give eBay its due. This was a solid report, a good outlook, and precisely what investors have been wanting to see.

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