In preparation for today’s results, I read all of the sell-side analyst reports and chatted with several buy-side analysts. Here’s what everyone is going to be focusing on.
eBay Macro financials
With any public company top and bottom line are always the first thing everyone looks at. For Q2, here’s the skinny:
- Revenue – The street (consensus) is at $2.17b, company guidance was $2.1-2.15 so this would be a beat if it comes to fruition. Some analysts are as high as $2.21b
- EPS – The street is at $.41, company guidance was $.39-$.41. I’ve seen $.43 from some analysts.
- There are lots of whispers out there that eBay will use the Q2 ‘beat’ to raise the 2H08. That would be pretty impressive given the macro-economic backdrop. Putting myself in eBay’s shoes, I probably wouldn’t do this unless I was 110% sure I could meet/beat that raise even with a speed bump or two.
eBay marketplace health metrics
As with the last 18 months or so, Wall St. likes to hear updates on PayPal+Skype, but the general feeling is that if the company (eBay corp) can’t get the marketplace/core business re-accelerated, then PayPal+Skype get little to no weight. Thus all eyes are on several eBay marketplace ‘health metrics’ (most of which have had negative trends for the last two years and we’ve been tracking at eBay Strategies for a loooong time):
- Revenue growth – For a long-time, revenue growth has outpaced GMV growth thanks to advertising and increasing take rates.
- GMV growth – If I were to pick one number to follow this would be it. In Q1, GMV grew at 12% globally. However if you take out the benefits of currency (FX in wall st speak), it was really 8% globally. The US grew at 5% (ex stubhub).
- Active users – Active user growth was at its lowest ever in Q1 (1% ex-China) and seems to be stuck aroud 83m users globally. We’ve seen evidence that eBay’s couponing went further back into the ‘activation tail’ this Q and it will be interesting to see if they were able to a) stem the loss of active users via coupons and b) reactivate any recently de-activated users. We won’t know which of these (or the mix), but you’ll see it in that 83m number.
- Listings – Given all the fee changes, diamond-tier sellers, etc. I think this metric has become effectively disconnected from the business so I don’t really monitor it.
I’m personally interested to hear how the couponing and other strategies are working on GMV growth and active users.
It may not seem fair, but while everyone does watch the eBay core business, if there were any negative surprises on PayPal metrics, I think you’d see the stock get punished, however any upside on these PayPal metrics probably won’t move the needle. The key PayPal metrics to watch are:
- PayPal Revenue – has been growing at 32% y/y, any slowdown is bad, any acceleration is good.
- Transaction Processing Volume (TPV) – TPV has been growing at 34% y/y – same as above.
- eBay ‘coverage’ – In Q1, 54.5% of eBay’s GMV went through PayPal (counts toward TPV). In Q2 did that go up or down? As eBay makes PayPal required (as an offering) in AU/UK, it would seem we should see this move.
- On/off eBay growth rates – In Q1, on-eBay Paypal TPV grew 17% and off-eBay grew at 61%. Everyone will be lookiing for any changes here.
Optics – radar will be up on these topics
Most importantly for the conference call is that intangible ‘body language’. Wall St’s radar is particularly raised about these topics:
- Macroeconomics – You’d have to live under a rock to not have heard about the financial crisis, record oil/gas, consumer confidence at a 30yr low, etc. Wall St. is very concerned this will impact ecommerce and online advertising. Some Wall St’ers are perplexed why there hasn’t been a material ‘falling off a cliff’. I have some theories here we can get into in a future post. If eBay says something like ‘consumer softness’, you can expect some downside in the stock tomorrow.
- Stock repurchase – Everyone is anticipating that the company is using the 15-20% decline since Q1 results to buy back more stock with the cash eBay spins off. Speculation is around a buyback in the $300-500m range for Q2.
- eBay Core – How’s demand? Why are pageviews down? Finding 2.0 update? Coupons working? Microsoft rebate program working? How’s BestMatch? Any changes coming to the fee structure? Any more diamond-tier sellers coming? Can/will that be material 2H08? The car companies are all doing poorly, is this material in eBay Motors?
The release will be out at 4:30pm and the call will start at 5pm. I always recommend eBay sellers tune into these things as you can gain important insights into what eBay’s thinking and how it can/will impact your business.
Seeking Alpha disclosure: I’m Long Google (who reports Thurs!)