Though eBay managed to increase its profits 28 percent for the quarter, Wall Street was unimpressed. eBay cited increased costs for search engine marketing as a prime reason for its slowed growth, though the company also reported that its expansion into Germany has not been as successful as it had hoped. However, overseas growth as a whole was brisk.
On Apr. 20, investors worried about eBay's (EBAY) slowing growth got a little encouragement -- just not enough to change their minds much.
That met analysts' expectations, but no more.
The one glimmer of an upside came as the online marketplace slightly upped its estimates for profit and sales growth for the year, to between $0.71 and $0.73 per share net income, on sales of $4.27 million to $4.36 billion.
But that apparently wasn't enough to energize investors, who played ping-pong in after-hours trading, moving eBay's share price up and down a point or so.
That followed a 3% rise, to $33.11 a share, before the report, thanks to the afterglow of Yahoo's (YHOO) better-than-expected quarterly earnings.
"The results are not likely to alter perceptions," says Pacific Growth Equities analyst Derek Brown, who has an "underweight" rating on eBay, which is a BusinessWeek 50 company.
Growth in listings and gross sales also continued to decline, as Chief Executive Margaret Whitman pointed out.
"We saw softer listings growth in January than expected," she said during a conference call, though eBay promotions helped pick up the pace by mid-February.
According to Scott Devitt, an analyst with Legg Mason Wood Walker, eBay clearly managed to avoid underperforming against expectations, which many other analysts had feared.
In any case, the reaction to eBay's more recent results were a far cry from the alarm that followed the company's fourth-quarter report in January (see BW Online, 1/20/05, "eBay Loses Some Mojo").
She said she expects growth to resume in coming quarters, owing to increased marketing and new features.
Those expenses weren't quite as onerous in the first quarter, falling to 26% of revenues, from 29% in the previous quarter.