eBay is scheduled to report its fourth-quarter (Q4) 2008 earnings after the close of the stock market today. The company will host a conference call with analysts at 5 pm Eastern. Areas of concern mentioned in analyst reports include the recession - including car sales - and the effect of exchange rates.
Some questions that may be raised during the conference call include those around eBay's acquisition of Bill Me Later (and Amazon's announcement on December 31 that it would no longer accept the payment option on its site); the effect eBay's laying off of 10 percent of its workforce; and the effectiveness of its holiday marketing that included couponing, participation in Microsoft's Live Search cashback program, and "Daily Deals" promotions. Excerpts from recent analyst reports of interest to eBay sellers follow.
Mark Mahaney, Citigroup Investment Research
Based on our proprietary listings tracking, our assessment of FX trends, and channel checks throughout the quarter, we believe there could be modest upside to Street estimates this quarter. At the same time, we believe Severe Macro conditions, ongoing marketplace uncertainties, and an increasingly competitive environment are likely to make eBay's outlook highly conservative.
In Addition To P&L Results, Key Areas To Focus On - 1) Management comments re: marketplace changes; 2) GMV trends in eBay's core markets including comments on conversion rate and ASP trends - Q3 conversion rate and ASPs were down 1800 bps and 700 bps, respectively; 3) Auction vs. Fixed Price and monetization trends; and 4) Comments on PayPal, BillMeLater integration, and impact of macro slowdown on marketing services.
Separately, we continue to remain concerned about what we view as eBay's negative buy-side and sell-side trends. By the negative buy-side trend, we are referring to eBay's consumer/user trends and the fact that for 14 of the past 16 months, eBay's U.S. unique visitors have declined Y/Y. And for the negative sell-side trend, we are referring to what seems to be an acceleration of seller diversification away from eBay. While some of the seller attrition is by design (eBay is deliberately pruning "bad sellers" from the site), our channel checks suggest that some of the changes being made on the site appear to be frustrating some of the good sellers as well.
Scott Devitt, Stifel Nicolaus
We expect core marketplace GMV to be down in the low double digits on a YOY basis due to eBay's structural challenges in combination with a weakening consumer environment and foreign currency effects in 4Q08. After removing low monetization vehicles from the mix, we expect GMV to be down in the high single digits in the quarter.
Areas of interest in the quarter will include the early integration of Bill Me Later, Microsoft Live promotions, PayPal Merchant Services, Skype growth/profit expansion, and uses of cash (buyback, dividend, strategic acquisitions). We expect PayPal transaction revenue growth of 15% down from 29% in 3Q08 due to a slowing rate of global eCommerce growth, currency, and more difficult Merchants Service comparables.
Jim Friedland, Cowen and Company
Conclusion: We are lowering our 2009 revenue and EPS estimates for eBay by 3% due to 1) the further strengthening of the U.S. dollar, 2) a weaker retail sales outlook, and 3) the precipitous decline in worldwide auto sales. (Motors is the largest category on eBay.) We expect eBay shares to remain under pressure due to macroeconomic headwinds and market share loss in its core marketplaces business.
- Lowering 2009 eBay U.S. GMV (gross merchandise volume) estimate by 2%, to $24.2 billion, or a 12% y/y decline. We expect the company to use couponing to drive transactions, which should weigh on margins. In addition, we remain concerned that eBay will have to further reduce fees to stem share loss to competitors, which would also hurt profits.
- Expect sharp declines in global auto sales to pressure eBay Motors GMV. U.S. light vehicle sales (in units) declined 35% y/y in Q4:08, compared to an 18% y/y decline in Q3:08. eBay Motors (vehicles, parts, and accessories), which declined 9% y/y in Q3:08, is eBay's largest category and accounted for 29% of worldwide GMV in Q3:08.
- Expect weakness in the eBay marketplace to weigh on PayPal's growth. About half of PayPal's Q3:08 total payment volume was derived from purchases made on eBay.
