EBay Inc. (EBAY:US), the world’s largest Internet marketplace, gained the most in three months after reporting sales and profit that beat analysts’ estimates as more U.S. consumers shopped for new items on the site.
EBay rose (EBAY:US) 7.9 percent to $43.65 at 10:01 a.m. in New York, for the biggest increase since April 19. Second-quarter revenue climbed 23 percent to $3.4 billion, the company said yesterday. That exceeded the $3.36 billion average analyst estimate compiled by Bloomberg. Profit excluding some items was 56 cents a share, topping the 55-cent prediction.
Chief Executive Officer John Donahoe has increased spending on advertising and new technology to expand beyond EBay’s auction roots and let shoppers buy more items in instant sales, similar to those on Amazon.com Inc. (AMZN:US)’s site. Those efforts led to gains in EBay’s Marketplaces unit as total U.S. online sales jumped 15 percent in the quarter, according to ComScore Inc.
“The biggest surprise was that the upside was driven by the marketplace,” said Colin Sebastian, an analyst at Robert W. Baird & Co. in San Francisco. “Typically we see a little more sizzle coming from PayPal. That gives credence to the view that EBay has stabilized the marketplace.”
Fixed-price sales -- items not sold through auctions --grew 13 percent in the second quarter, and made up 65 percent of global merchandise transactions, the company said.
Revenue at PayPal, EBay’s electronic-payment unit, surged 26 percent to $1.36 billion in the period, while the total value of transactions processed climbed 20 percent to $34.5 billion. PayPal had 113.2 million active accounts at the end of the three-month period, up 13 percent from a year earlier.
The stock rose as high as $42.96 after the report. It had increased 3.6 percent to $40.46 at yesterday’s close in New York. Shares of the San Jose, California-based company have gained 33 percent this year.
While EBay is investing more to promote sales of unused items -- about 70 percent of items sold on the site are new -- the company is trying to set itself apart from Amazon and other online retailers, Donahoe said.
“Our sweet spot is last season’s new items,” he said in an interview. “In consumer electronics, people are coming out with a new model every quarter. In clothing, the entire inventory turns over every quarter. In another month, Nordstrom doesn’t want bathing suits in their stores. EBay’s a great place to get rid of summer inventory.”
Marketing expenses increased by 22 percent in the first half of 2012 from a year earlier, and the company bolstered investments in technology development by 34 percent.
The online retailer has added to its mobile technology and is pushing users to sign in over their phones more often. Downloads of mobile applications have surpassed 90 million worldwide since they were introduced in 2008. Shoppers who browse using their phones are three to four times more valuable than ones who exclusively shop on EBay’s website, Donahoe said.
EBay and PayPal mobile will each garner $10 billion in transaction volume this year, Donahoe said on a conference call yesterday. That’s up from a projection of $8 billion for EBay and $7 billion for PayPal.
Net income in the second quarter more than doubled to $692 million, or 53 cents a share, from $283 million, or 22 cents, a year earlier, the company said.
In the third quarter, revenue will be $3.3 billion to $3.4 billion, the company said, compared with an average analyst projection (EBAY:US) of $3.41 billion. EBay forecast profit excluding some items of 53 cents to 55 cents a share, versus a 55-cent estimate.
Over the past year, PayPal developed a card reader that plugs into a smartphone headphone jack, a bid to attract more small merchants and compete with Square Inc. It also added software to existing payment terminals at larger retail partners such as Home Depot Inc. (HD:US), allowing in-store purchases with PayPal.
The company acquired a startup called Card.io, which develops technology that captures credit-card information through a phone’s camera, EBay said in a statement earlier this week. The technology will enable customers to more easily slot cards into the PayPal digital wallet, which lets users keep credit card information from multiple providers -- including Visa Inc. (V:US) and MasterCard Inc. (MA:US) -- in one spot.
“It’s going to be a hard road for them to travel to get traction” in offline payments, said Colin Gillis, an analyst at BCG Partners in New York. “But you don’t need that to work to own EBay.”
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