EBay's profit up 53 percent, shares rise

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SAN FRANCISCO (Reuters) - EBay Inc. (EBAY.O: Quote, Profile, Research) on Wednesday posted a 53 percent rise in quarterly profit and raised its financial targets, driving shares up nearly 15 percent and allaying concerns about slowing growth at the world's largest online marketplace.

The company pointed to strong business in its key markets, the United States and Germany, and its online payment service, areas where competition is seen growing.

EBay, which has become a global trading platform for everything from kitschy collectibles and classic automobiles to farming equipment, also pointed to strong growth overseas. It is aggressively expanding in Europe and Asia, particularly in China.

"Excellent momentum in the U.S. and Germany, as well as at PayPal, all helped deliver an impressive jump in revenues and profit," eBay Chief Executive Meg Whitman said in a statement.

Revenue in the United States rose 27 percent to $423.6 million in the second quarter from a year ago -- accelerating from 20 percent in the first quarter -- while revenue outside the United States increased 51 percent to $418.8 million.

"The growth opportunity remains vast," Goldman Sachs analyst Anthony Noto said in a client note.

The San Jose, California-based company said second-quarter net income rose to $291.6 million, or 21 cents a share, from a year-earlier net profit of $190.4 million, or 14 cents a share.

Adjusted profit excluding some items was 22 cents per share, and revenue rose 40 percent to $1.09 billion from $773.4 million.

"EBay beat expectations and modestly raised guidance, but that was done given the backdrop of greater skepticism about the quarter and eBay's fundamentals," said Scott Kessler, Standard & Poor's Internet equity analyst.

EBay's second-quarter results came in ahead of analysts' average targets of $1.04 billion in revenue and 17 cents per share net earnings, according to Reuters Estimates.

EBay boosted its third-quarter revenue forecast to a range of $1.05 billion to $1.07 billion from $1.04 billion to $1.06 billion previously.

It also raised its net earnings forecast for the third quarter to 18 cents a share, compared with a range of 16 cents to 17 cents previously. For earnings excluding items, the company forecast 19 cents, versus its previous estimate of 18 cents to 19 cents a share.

Analysts' estimates had been for third-quarter revenue of $1.06 billion, net earnings of 17 cents a share and earnings before items of 18 cents.

"It's a very aggressive increase in guidance," because it assumes a stronger dollar, eBay Chief Financial Officer Rajiv Dutta told Reuters. The new outlook assumes an average exchange rate of $1.20 per euro, compared with the previous assumption of $1.30. The weaker dollar boosted eBay profits in earlier quarters.

EBay, with a market capitalization of $47.7 billion, recently was replaced by Web search leader Google Inc.(GOOG.O: Quote, Profile, Research) as the Internet's most valuable company. Google's valuation is $86 billion.

Shares of eBay trade at a multiple of 35.2 times 2006 estimated earnings, versus Google's multiple of 45.7.

Whitman said on a conference call with analysts that the number of searches on eBay is on par with those on Google.

Searches on eBay are generally for products, while Google focuses on searches for information, but some analysts have predicted that the two companies will one day compete head on.

Google is expanding its comparison shopping service Froogle.com and building an online payment service expected to compete at least indirectly with PayPal, while eBay has been working to improve search on its site and has a deal to buy comparison shopping engine Shopping.com Ltd.(SHOP.O: Quote, Profile, Research)

Shares of eBay rose 14.7 percent in extended trading on the Inet electronic brokerage network to $39.98. In regular trade, shares of eBay fell 50 cents, or 1.4 percent, to close at $34.87 on Nasdaq. (Additional reporting by Duncan Martell in San Francisco)