Monday, January 08, 2007

Calls of Note Part 6

- Piper Jaffray is surprisingly negative on eBay (NASDAQ:EBAY) saying their proprietary count of worldwide eBay listings suggests total Q4 listings of between 578M-590M. These results are between 8%-11% below their 639M listing estimate for the quarter and could potentially be sequentially down in the seasonally strongest quarter (listings were up sequentially 19% in 4Q05 and 17% in 4Q04). While listings were expected to be weaker than in previous years due to the changes to Store listings, a second sequential quarterly decline, and listings below expectations, estimates are likely to come down.

Assuming firm's range of a listing miss of 8%-11% is accurate, eBay would need a corresponding increase in revenue per listing of 8%-11% in order to match their $1,052M estimate for Q4 auction-based revenue. Firm notes that their estimate for total revenue is near the mid-point of company guidance and $21M below the Street consensus. Without any improvement in revenue per listings, the shortfall could be near $100M.

Current Street consensus estimates for 2008 assume growth accelerating from 21% in 2007 to 22% in 2008, despite the marked slowdown in growth eBay is seeing across its core properties. Considering that slower listings growth indicate that 4Q06 overall growth will likely only be between 21%-23% (down from 42% in 4Q05), PJ believes that expectations of over 20% growth for '07 or '08 are unrealistic. Firm's newly released 2008 revenue estimate of $8,142M is $568M below current Street expectations and assumes 16% growth in 2008.

Maintains UP and $25 tgt.

Notablecalls: Wow! If this is true and the listings have indeed declined THAT much, EBAY shareholders are in for some turbulence. The stock has been standing on shaky ground and I think will continue to trade down in the n-t. I would not be surprised to see a warning from EBAY. Nice piece of research from Piper Jaffray! Actionable call alert!

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