eBay Earnings Preview: First Quarter 2009

eBay [[EBAY]] is scheduled to report their first quarter 2009 results after the market closes on Wednesday, April 22. Based on our analysis, we at EarningsPreviews.com are expecting EBAY to report slightly better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $1.88 billion and EPS of $.34. This would represent a 14% decline in revenues from last year’s $2.19 billion in the same period. The current analyst consensus estimates calls for revenues of $1.94 billion and $.33 EPS. On January 21, the company provided first quarter 2009 guidance for revenues of $1.80 – $2.05 billion and non-GAAP EPS of $.32 – $.34.


Despite the current challenging retail environment, eBay’s traffic appears to be showing moderate growth. eBay may be the beneficiary of consumers more aggressive attitude towards finding bargains. That being said, 2009 will likely be a very challenging year for the company


We believe that the recent announcement that eBay may spin off their Skype business shows management’s commitment to increasing shareholder value. At their recent analyst day presentation, management also emphasized their focus on cost savings and believes that they can reduce costs by $2 billion over the next three years.


Share Performance

eBay’s shares are up over 2% since the beginning of the year. In 2008, EBAY’s shares fell almost 58%, as it underperformed the 34% decline in the Dow Jones index.



Shares are now trading at 9x consensus 2010 EPS estimates. This is below the relative valuations of their peer group. While eBay faces a very challenging economic environment in 2009, we believe that the market is currently undervaluing their business.


Recommendation: Buy with a $20 price target.


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