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eBay posts higher profits
No. 1 online auction tops 1Q estimates; stock edges higher on strong growth in sales, new listings.
April 20, 2005: 7:16 PM EDT

NEW YORK (CNN/Money) - Ebay redeemed its status as an industry leader Wednesday by impressively boosting its sales and new user base growth after a sluggish performance going into 2005.

But having done that, a few industry analysts say the company is not out of the woods yet.

Shares of eBay have fallen 45 percent year-to-date after the company rattled investors in January when it missed profit estimates and saw growth slowing in the U.S. market.

And eBay did little to soothe investors' nerves when the company implemented a price increase in seller fees earlier this year, a move that caused an uproar and threats of boycott from once eBay loyalists.

Given that backdrop, eBay's first-quarter performance is a sweet victory for the company and should allay investors' concerns that eBay's heyday has ended.

"Ebay put out good numbers," said Scott Devitt, analyst with Legg Mason Wood Walker. "Wall Street had already priced in a possible miss or even lower guidance going forward but that did not happen. Ebay in fact moderately raised expectations. So that's a good thing."

The world's biggest online auction company beat Wall Street's earnings forecasts. Sales for the period ended March 31st jumped 36 percent to cross the $1 billion mark for the first time, up from $756 million a year ago, in line with analyst expectations.

Excluding one-time items, the world's biggest online auction company had a profit of 20 cents a share. Analysts, on average, had expected a profit of 18 cents a share, according to earnings tracker First Call.

It had net income of $256.3 million, or 19 cents a share, compared with net income of $200 million, or 15 cents a share, a year earlier.

And eBay said it saw a record increase in registered users, up 40 percent to 147.1 million, compared to 105 million users a year ago.

Ebay's stock, however, flip-flopped in after hours trading, trading marginally lower on INET after rising about 3 percent in regular trading.

"I think that the performance last quarter was mixed," said Derek Brown, an analyst with Pacific Growth Partners. "While eBay's revenue guidance showed a slight uptick, it's not too far from current street estimates.

Is eBay all grown up?

In a conference call with analysts, eBay executives continued to stress that still has plenty of opportunity to expand in international markets.

EBay CEO Meg Whitman singled out China, India and Korea as markets offering "tremendous" growth potential for the company.

Chief financial officer Rajiv Dutta said revenues from eBay's German operations rose a respectable 24 percent but admitted that the company was still facing headwinds there.

Overall, the broad concerns about eBay's growth potential still remains, particularly in the U.S. and German market. These may be two isolated markets but they are still extremely important to its business."

For fiscal 2005, eBay said it expects total revenue to fall in the range of $4.27 billion to $4.36 billion, slightly below the top-end of analysts' forecasted range of revenue of between $4.29 and $4.45 billion.

The company raised its profit guidance for fiscal 2005 to be between 76 to 78 cents a share, up from its earlier estimates of 74 to 76 cents a share. Wall Street estimates are for a profit of between 76 to 80 cents a share.

U.S. net transaction revenues rose 20 percent year-over-year to $404.8 million. Revenues from its international operations rose 52 percent year-over-year to $393.8 million.

Revenue from PayPal, eBay's online payment unit, rose 47 percent to $233 million. The total dollar volume of payments initiated through the PayPal system was $6.2 billion, a 44 percent increase from the $4.3 billion reported for the same period a year ago.

Said Devitt, "If we pick apart eBay's results, the story is that PayPal was the strong point in the quarter."

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