Shares of EBay slipped after hours as traders parsed through earnings, though the company beat expectations.
But ”their marketing costs went up,” explains trader Patty Edwards. And that seems to give investors pause.
EBay is in the midst of a transformation from auction site to an wide ranging e-commerce destination more like Amazon. And as part of its transformation, eBay is investing heavily in a marketing campaign.
With a plan of that scale, it’s possible that investors were hoping eBay would beat expectations by a larger margin, explains Edwards.
In addition, eBay's fourth-quarter outlook also appeared conservative. EBay said it expects to see fourth-quarter earnings excluding items between 55 and 58 cents a share, and between $3.2 billion and $3.35 billion in net revenue. Both are at the low end of analysts' expectations.
The technicals don’t look good either. According to trader Guy Adami the stock has topped about around $35.50 a number of times. “Each time there’s been a precipitous sell-off.”
However, Adami says this is a case of first the bad news now the good news. Third-quarter net income climbed 14 percent, helped by growth in its PayPal online payment service. “That PayPal unit is just crushing!” he exclaims. And that alone is a good reason to buy the pull back.
”If it gets below $30, I’m a buyer,” he says.
Looking at the numbers more closely, the company earned 48 cents per share, which is what analysts polled by FactSet were expecting. Revenue increased 32 percent to $3 billion, beating analyst expectations for $2.9 billion
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Trader disclosure: On Oct 19, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour is long AAPL; Seymour is long BAC; Seymour is long INTC; Seymour is long NOK; Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Finerman owns AAPL; Finerman wons JPM; Finerman’s firm owns JPM leaps and puts; Finerman’s firm owns AAPL and short calls; Finerman’s firm owns IBM and short calls; Finerman’s firm owns YHOO and short calls; Najarian has AAPL call spreads; Najarian has GS call spreads; Najarian is long RVBD; Najarian is long Long CIGX; Najarian is long CME; Najarian is long CBOE
For Patty Edwards
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Stutland is long V and has short V calls
Stutland Equities is market maker holding options and underlying positions hedged in VIX, VXX, SPX, SPY
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