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A stock to look at: eBay results very solid

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Last night, in addition to reporting strong results, eBay Inc (NASDAQ: EBAY) also provided good guidance, increasing revenue and earnings forecast for the company.
  • Total revenue growth was 27%, with organic growth being up 21% -- strong numbers
  • EPS up 39% -- 3 cents ahead of consensus estimates
  • Over $400 million in free cash flow, very solid considering the huge investment in current and new growth opportunities
PayPal continues to grow rapidly adding to its position as the largest on-line payment platform. An area of strong growth is Europe as eBay added some 35 million accounts with 5 million accounts in Germany alone. In addition, PayPal continues to build on new product launches. Specifically, PayPal's buyer protection program, which covers purchases of 95% of products on eBay, is turning into a cash flow machine as it continues to grow.

Skype, its VOIP communications platform, continues to be monetized successfully as it added 24 million new users in the quarter. But more importantly, revenue jumped 87%, hitting $79 million and turned profitable in the quarter. This business has potential to be another free cash flow, with a 196 million user base. Adoption of paid subscription is taking traction.

Marketplaces grew revenue 22% year over year due to higher ASP and its huge 230 million user base. However, overall listings in the US and Germany are weaker than eBay would like. Emphasis on reducing lower-end products and lower-end sellers is negatively affecting listings which is somewhat to be expected and has eBay focusing on higher margins and higher ASPs.

We blogged earlier in the year that eBay was due to take-off again, which is proving correct. Stay with this stock and if you don't own it, I'd consider getting into it.

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DJIA+17.4610,023.42
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S&P 500+2.671,069.30

Last updated: November 07, 2009: 04:25 AM

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