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eBay on Recovery Track, but Stuck in Traffic?

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AP

Somehow, somewhere during eBay's fourth quarter, the company turned a corner from merely talking about and trying to implement a sweeping recovery plan to seeing the fruits of its labor. The company saw a nice one-two punch of consumers swarming to online shopping, and having the strategic changes to its business plan in place to take advantage of it.

The company's fourth quarter recovery builds on some trends that developed during the third quarter, when the company reported its first positive, year over year revenue quarter in a year. Wall Street anticipates 40 cents a share on $2.28 billion in revenue, and there's every indication that eBay should be able to at least meet those expectations.

Citi's Mark Mahaney once again has offered up a "cheat sheet" of sorts which is certainly worth a look-see. While EPS consensus sits at 40 cents, Mahaney suggests that even a two-cent beat would be deemed "neutral" by investors; that if eBay were to beat, it would have to do so by at least 3 cents in order to see any meaningful upside trading on the news. On the topline, a neutral revenue range would be $2.27 billion to $2.37 billion. North of $2.37 billion would be "positive."

Other key metrics to watch: US Gross Merchandise Volume should have grown 9 percent during the quarter, to about $5.57 billion; International GMV should be up 22 percent to $8.32 billion, says Mahaney. Marketplaces transactions should be up 15 percent to $1.21 billion; payments transactions, the home to PayPal, should be up 19 percent to $717 million; Active User Growth should be up 2 to 4 percent, and anything north of 4 percent would be considered positive.

As far as first quarter guidance is concerned: The Street is looking for an earnings per share midpoint of 40 cents on revenue of $2.184 billion.

All of this would suggest a company in recovery mode. The fourth quarter showed stronger than expected trends among online shoppers. comScore said holiday shoppers spent over $29 billion online, up 4 percent from the same period a year ago, and while eBay's year over year growth still trails rival Amazon , it is growth nonetheless, and eBay's multiple is a fraction of what Amazon's is. eBay shares were up almost 69 percent in 2009, but still trades at only 14 times this year's estimates. By comparison, Amazon jumped better than 160 percent and trades at 48 times this year's earnings.

What's the better buy? Depends on how much faith you have that eBay can keep this momentum going, and how much faith you have in CEO John Donahoe's leadership. PayPal continues to be a stellar performer and the company's plans to expand its online penetration, as well as other applications for the technology, shows enormous promise. It's momentum on the Apple iPhone platform as well as Android is also yielding almost instant -- and significant -- returns.

The company has said this is a multi-year strategy that is on track, even tough eBay runs the risk of getting stuck in macro-economic traffic jams that can stall its turnaround. But the glass seems a little more than half full at this point, and eBay may finally be showing signs of life.

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