Best Idea eBay () reported fantastic first-quarter results after the close Wednesday. Both revenue and net income expanded at a nice double-digit pace, as PayPal continues to drive strong performance. In after-hours trading, the shares are up 6%+ (to over $38 per share) on the report. We are strongly considering adding to our existing position in the portfolio of our Best Ideas Newsletter, as we think the shares are conservatively worth $46 each (with upside to the high $50’s based on the upper end of our fair value range).
<< View Our Newsletter Archives
In the first quarter, the global commerce platform and payments leader’s revenue advanced an impressive 29% from the same period a year ago. Net income on a non-GAAP basis came in at $725 million, or $0.55 per share, a nice showing (consensus was at $0.52 per share). As followers of Valuentum know, we believe eBay is essentially trading on the value of its PayPal assets alone, and such performance by the division during the period further reinforces this view. PayPal ended the quarter with 109.8 million active registered users (a 12% increase), while its revenue jumped 32% on a year-over-year basis. PayPal’s net total payment volume grew 24%, to $34 billion. In addition to continued web traction, we’re expecting solid adoption of PayPal’s mobile and point-of-sale initiatives. Specifically, the firm expects to process $7 billion in mobile payment volume during 2012 and has just started its endeavor to expand to offline merchants, with Home Depot (HD) launching PayPal payments in all of its 2,000 US stores.
Though we like eBay based on its PayPal business, the company’s Marketplace business is not performing poorly at all. In the quarter, gross merchandise volume, excluding vehicles, jumped 12% on a year-over-year basis, to over $16 billion. We credit such strength to the firm’s ongoing improvement in making the site easier and faster to use for consumers. Further, the company’s recently-acquired GSI business generated $715 million in sales during the period, with same-store-sales up 26%.
Looking ahead, on a full year 2012 basis, eBay expects revenues to be as high as $14.1 billion (consensus was at $13.85 billion) and non-GAAP earnings per share to come in at $2.35 per share at the upper end of the range (consensus was at $2.30 per share). We think the range will be exceeded on both the top and bottom line for 2012.