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eBay Inc. (EBAY - Analyst Report) is set to report first quarter 2013 results on April17. Last quarter it posted a 4.92% positive surprise. Let’s see how things are shaping up for this announcement.
Growth Factors this Past Quarter
eBay's strength at PayPal, fast-growing presence in the mobile space and reinvigorated Marketplaces business all led to higher sales growth rates in the fourth quarter of 2012. The continuous introduction of new solutions to enhance the mobile shopping experience and rapid consumer adoption also attributed to higher sales. eBay’s mobile business touched $13 billion in 2012 and is expected to generate $20 billion of mobile commerce and payments volume in 2013.
However, the quarter was weak for eBay in terms of margin expansion. We believe that the sale of low-value items and increased expenditure on the launch of various new products will continue to hurt margins.
The company is also facing strong competition from major online retailer Amazon.com. Google has also been making some plays in the online retail/payments segment that potentially increase the competition for the company.
Our proven model does not conclusively show that eBay is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, #2 or #3 for this to happen. That is not the case here as you will see below.
Negative Zacks ESP: The Most Accurate estimate stands at $0.53 while the Zacks Consensus Estimate is higher at $0.54. That is a difference of -1.85%.
Zacks Rank #3 (Hold): eBay’s Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Netflix Inc. (NFLX - Analyst Report), Earnings ESP of +5.56% and Zacks Rank #2 (Buy)
Amazon.com (AMZN - Analyst Report), Earnings ESP of +190.0% and Zacks Rank #3 (Hold)