Ahead of the Bell: EBay falls despite strong 3Q

posted: 35 DAYS 17 HOURS AGO

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NEW YORK -Shares of online retailer eBay Inc. fell in premarket trading on Thursday, despite strong third-quarter results, as investors expressed disappointment over guidance as the crucial holidays approach.

The San Jose company, which has been revitalizing its main Web site in an effort attract shoppers looking for deals, reported earnings fell 29 percent — due partly to the stronger dollar — but revenue rose 6 percent to $2.24 billion, helped by its PayPal online-payment service.

The company offered guidance for the fourth quarter, which contains the all-important holiday season, at the low end of analyst expectations. Investors sent shares down in after-hours trading and again in premarket trading, where shares fell 85 cents, or 3.4 percent, to $24.18.

Analysts said the sell-off was unwarranted, however.

"Underlying fundamentals are improving faster than expected," wrote Bernstein Research's Jeffrey Lindsay in a client note. "We believe that disappointment over fourth-quarter guidance is unfair as comparisons are skewed by an earlier than expected closing of the Skype sale."

He added that eBay is often conservative with revenue guidance. He reiterated his "Outperform" rating and $28 price target.

Janney Capital Markets analyst Shawn Milne also said guidance was conservative and the company might be able to beat it, helped by Web site improvements and PayPal strength. But he said "guidance confusion" could cause the stock to be "choppy" in the near term.

He reiterated his "Buy" rating and raised his price target $1 to $29.

2009-10-22 09:12:42