eBay finished 2012 with a flourish as bargain-hunting festive shoppers flocked to its internet shopping centre and digital payment service to help lift the company’s fourth-quarter earnings above analyst projections.
The results served as the exclamation point on the best year yet for eBay, an e-commerce pioneer founded in 1995 when the concept of buying merchandise online seemed absurd.
Online shopping has since become a staple for hordes of consumers, turning eBay into a thriving business and a Wall Street favourite.
But the growing popularity of smartphones and tablet computers is once again changing the way many people shop. EBay is trying to remain at the forefront of the shift by retooling its online bazaar and popular payment service, PayPal, to work better with mobile devices.
The company, based in San Jose, California, says its mobile applications have been downloaded on to more than 120 million devices, putting its services in easy reach of consumers even as they peruse the aisle of brick-and-mortar stores.
“Mobile is quickly becoming the new normal, and we are leading this new way consumers shop and pay,” eBay chief executive John Donahoe told investors during a conference call.
He predicted that PayPal and eBay’s marketplaces division, where most of eBay’s shopping activity occurs, will each process more than $20bn in mobile transactions this year.
eBay does not keep all the revenue that passes through its services. PayPal charges merchants a fee to deliver payments from customers and eBay collects fees for products listed and sold online.
The strides that eBay has made in the mobile market have impressed investors, helping to propel the company’s stock price to a 68% gain last year.
The company’s fourth-quarter performance provided another boost as eBay stock edged up 40c to $53.30 in yesterday’s after-hours trading. The market’s reaction was tempered by a management forecast for the current quarter that was slightly below analysts’ expectations.
eBay earned $757m, or 57c per share, during the final three months of last year. That represented a 62% decrease from net income of two billion dollars, or 1.51 per share, at the same time in 2011.
The 2011 numbers were inflated by a windfall from eBay’s $8.5bn sale of online communications service Skype to Microsoft.
If not for certain one-time items, eBay said it would have earned 70c a share. That figure was a penny above the average forecast among analysts surveyed by FactSet. The most recent quarter’s earnings were up by 17% from 2011, on an adjusted basis.
Revenue climbed 18% from the previous year to nearly $4bn, in line with what analysts forecast.
As has been the case for some time, PayPal generated the greatest growth. Fourth-quarter revenue from the payment service totalled $1.54bn, a 24% increase from the previous year.
PayPal, which eBay bought a decade ago, added five million more account holders in the fourth quarter, its biggest three-month gain in eight years. The service now has about 123 million users, many of whom contributed to the roughly 700 million payments processed by PayPal during the fourth quarter.
eBay is now trying to extend PayPal’s reach offline. The company has already struck agreements with 23 retailers, including Abercrombie & Fitch, Barnes & Noble, RadioShack and Home Depot, to accept PayPal in their stores. Beginning this spring, PayPal also will be accepted at retailers that take the Discover card.
The marketplaces division produced fourth-quarter revenue of $2.05bn, up 16% from the previous year.
To start this year, eBay expects adjusted first-quarter earnings of 60c to 62c per share on revenue ranging from $3.65bn to $3.75bn.
Those figures are below analysts’ predictions calling for adjusted earnings of 64c per share on revenue of $3.8bn.
For all of 2012, eBay earned $2.6bn, or 1.99 per share, on revenue of $14.1bn. With the Skype sale, eBay earned $3.2bn, or 2.46 per share, in 2011. Revenue for that year totalled $11.7bn.