eBay ?hold?

26.01.07 - AC Research

NEW YORK, January 26 (newratings.com) - Analyst Henning Wagener of AC Research reiterates his "hold" rating on eBay Inc (EBAY).

According to AC Research?s research note dated January 25 and published this morning, the company has published its 4Q06 earnings results. eBay managed to increase its sales revenues by 29% to $1.72 billion. Net earnings at the same time rose from $279.2 million in 4Q05 to now $346.5 million, or $0.25 per share. Adjusted by special effects, earnings per share reached $0.31.

The published sales and earnings results were slightly higher than the estimates, the analyst mentions. eBay benefited from heavy auction activities in 4Q06. Sales in this core segment were up 24%, climbing to $1.2 billion in the quarter. Here, business in Germany, the UK, and the US was particularly positive. At the same time, sales with respect to the PayPal online payment service grew 37% to $417 million. The analyst believes, however, that it would be wise to wait and see what competitive effect the new Checkout Service Google payment system will have. Up to now, the new competition does not seem to show a sustaining negative impact on the potential of PayPal, AC Research adds.

For the current fiscal year of 2007, the company has projected its sales at $7.05-$7.30 billion, as compared to its earlier guidance of $7.17 billion. The raised forecast is also due to the acquisition of the StubHub ticket marketing corporation and the new joint venture in China with local internet specialist TOM Online Inc.

At the current share price of ?26.05 and a 2007 P/E ratio of about 27, the company?s stock still seems to enjoy a rather adequate rating. In the next few months, eBay?s share price will also be supported by a stock buyback programme that has been announced, the analyst mentions. The company has indicated that this programme shall have a volume of $2 billion and shall run over a period of two years. At the same time, eBay succeeded in stabilizing its online auction core business. In 4Q, the company featured 81 million active users who exchanged commodities with a value of $14.4 billion, representing 20% growth. In all, the company?s share price already reflects the positive business perspectives.

AC Research reiterates its "hold" rating on eBay.