Event: Ebay (EBAY) reports earnings for the quarter ending Sept. 30, 2012 on Wednesday after the market closes. Wall Street expects the online auction company to report a profit of 55 cents per share for the quarter. That number has held steady over the last 90 days. Ebay has matched or exceeded estimates in each of the last four quarters. Shares of eBay have gained 40% in the last 12 months. Analysts expect eBay to grow profits by 16% from the current year to the next. At current prices shares trade for 20 times current year’s estimated earnings.
Analysis: It seems that eBay is running on all cylinders. The company is growing solidly and enjoying domination in the online marketing space. Perhaps the only argument against the company is that it may have reached a ceiling, but we’re not sure there is real evidence to support such a claim. Consumers are simply doing more and more on the Internet and eBay is positioned to exploit that dynamic.
Action: Be ready as shares are a bit pricey here relative to expected growth, thus an upside earnings surprise might not boost the stock much. A miss could have serious ramifications on the downside.
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