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eBay Inc (EBAY) Beats Earnings Ahead Of PayPal (PYPL) Split, $1B Added To Buybacks

eBay Inc (NASDAQ:EBAY) posted earnings for the second quarter this morning that beat analyst expectations, as revenue grew. The internet commerce firm also confirmed that the much-publicized spinoff of its PayPal unit will be executed tomorrow, and that it has sold its eBay Enterprise unit, an arm which handles logistics for third-party sellers, to a consortium led by private equity firm Permira for $925 million. eBay also said that it has committed to $1 billion in stock repurchases. Adjusted earnings for the internet auction house and e-commerce platform came in at $0.76 per share, up from $0.70 per share in the same prior-year quarter, on revenues of $4.38 billion, up from $4.1 billion a year ago. Wall Street was expecting earnings of $0.72 per share on revenue of $4.49 billion.

Paypal PYPL Mastercard MA Visa /

Though earnings fell hard, to $83 million for the second quarter from $676 million in the same quarter last year, this was largely due to write-offs for expected sales and discontinued operations. Loss from discontinued operations net of income taxes was reported to be $599 million. Loss per diluted share from discontinued operations was $0.49. eBay Inc (NASDAQ:EBAY) highlighted in its announcement that both the core business and PayPal experienced growth in the just-ended quarter. This is the final quarter eBay Inc (NASDAQ:EBAY)’s earnings include PayPal’s earnings, which grew by 16% to $2.26 billion, as the split advocated by billionaire activist investor Carl Icahn has been confirmed to be going through tomorrow. As such, eBay has provided forecasts for its core business and PayPal for the full year. It expects its core business’ revenue to grow 3% to 5% adjusted for currency sways, resulting in adjusted earnings per share of $1.72 to $1.77. The firm expects PayPal revenue to grow 15% to 18% adjusted for currency impacts, with earnings per share of $1.23 to $1.27.

Carl Icahn
Carl Icahn
Icahn Capital LP

Looking at key metrics for eBay Inc (NASDAQ:EBAY), its core marketplace revenue was $2.12 billion, a decrease from $2.18 billion in the second quarter of last year, though it could have increased 5% when adjusted for currency impacts. The firm said that there was an increase of 6% in the second quarter in the number of active buyers.

The relatively good quarter for the internet marketplace operator mirrors attention from hedge funds in the first quarter. Hedge funds who were still in eBay by March 31 increased the total value of their collective stake by 5.30% to $11.86 billion. The stock grew by just 2.78% in the first quarter. Furthermore, more funds went long in eBay in the first quarter, as by March 31 the stock was in 90 hedge fund portfolios among those we track. This is an increase of three from the previous quarter.

An everyday investor does not have the time or the required skill-set to carry out an in-depth analysis of equities and identify companies with the best future prospects like a fund with the knowledge and resources can. However, it is also not a good idea to pay the egregiously high fees that investment firms charge for their stock-picking expertise. Thus, a retail investor is better off to monkey the most popular stock picks among hedge funds by him or herself. But not just any picks, mind you. Our research has shown that a portfolio based on hedge funds’ top stock picks (which are invariably comprised entirely of large-cap companies) falls considerably short of a portfolio based on their best small-cap stock picks. The most popular large-cap stocks among hedge funds underperformed the market by an average of seven basis points per month in our back tests whereas the 15 most popular small-cap stock picks among hedge funds outperformed the market by nearly a percentage point per month over the same period between 1999 and 2012. Since officially launching our small-cap strategy in August 2012 it has performed just as predicted, beating the market by over 80 percentage points and returning over 139%, while hedge funds themselves have collectively underperformed the market (read the details here).

Insider Monkey also tracks insider transactions to see whether the management of companies like eBay are bullish on their firm’s shares or not. There have been no recorded purchases by insiders so far this year. The latest sale of shares was by Alan Lee Marks, SVP, Corporate Communications, who sold 17,881 shares on June 29 and the same number of shares on May 29.

Now let’s check out how the smart money has been trading eBay Inc.

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