eBay Inc (EBAY)’s Earnings Were Close, But..

The great e-commerce hope has fallen on its face today. eBay Inc (NASDAQ:EBAY) is 5.5% lower after a first-quarter report showed solid growth that just wasn’t solid enough. Is the reaction deserved, or is Amazon.com, Inc. (NASDAQ:AMZN)‘s greatest rival getting unfairly punished today? Let’s dig into the details.

eBay Inc (NASDAQ:EBAY) by the numbers
Both eBay Inc (NASDAQ:EBAY)’s top and bottom lines showed double-digit gains from the year-ago quarter. Sales were up 14% to $3.75 billion, and adjusted earnings per share of $0.63 came in 14.5% ahead of 2012’s first quarter and a penny above analyst forecasts. However, analysts had expected $3.765 billion in sales, and the letdown has more than offset the earnings beat. Here’s how the company’s latest quarter stacks up against its recent history:

Sources: Morningstar; eBay Q1 earnings report.

The one-time earnings spike notwithstanding, this quarter continues a general trend of first-quarter sequential declines from strong holiday quarters, while maintaining an overall upward trajectory. Part of the reason for today’s decline stems from what some analysts have called “light” guidance for the second quarter — $3.8 billion to $3.9 billion in sales resulting in $0.61 to $0.63 in EPS. This guidance, it’s said, now puts eBay Inc (NASDAQ:EBAY) under more pressure during its 2013 holiday season to meet full-year guidance of $16 billion to $16.5 billion in sales and $2.70 to $2.75 in EPS.

However, it’s worth noting that 2012’s holiday quarter posted 18% year-over-year sales growth, and net income ex-items more than doubled from 2011’s holiday quarter to 2012’s. eBay Inc (NASDAQ:EBAY) has put up strong holiday sales before, and it should be able to do so again so long as it continues to execute on its mobile strategy and expand its PayPal network.

What to expect going forward
eBay sounded the familiar refrain of so many companies that have missed their estimates: “Europe’s dragging us down!” If Europe is everyone’s problem, then it stands to reason that the market will ultimately respond in a broad way to European weakness, either by ignoring it or by turning south, as it has in recent days. More pertinent to investors is eBay’s growth everywhere else. In that regard, the company has not been growing quite so quickly as some hopeful analysts think: Although year-over-year sales gains were in the double digits for eBay’s international segment last year, the company also saw larger growth in its domestic segment. That can’t continue over the long term if eBay is really to become the global e-commerce juggernaut investors want to see, particularly because Amazon.com, Inc. (NASDAQ:AMZN) has beaten eBay’s growth, segment for segment, for the past three years.