Bids Keep Rising For EBay Shares

Online auctioneer EBay reported a small third-quarter profit and said sales rose sharply.

The company, whose stock had shot up earlier in anticipation of strong earnings, said it had a fully diluted profit of two cents per share, or five cents, excluding certain charges to earnings. Analysts had been expecting an operating profit of three cents per share, according to First Call.

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EBay (EBay)
EBay, which has been one of the most successful initial public offerings of the year, said it earned $663,000, or two cents per share, on a fully diluted basis in the third quarter, compared with a profit of $199,000, or one cent per share, in the year-ago period. Revenues surged to about $13 million from $1.5 million in last year's third quarter.

The company said its strong revenue growth mainly reflected increased activity on its Web site. It said gross merchandise sales, or the value of goods traded, increased 39 percent to $195 million from $140 million in the year ago quarter.

The number of registered users to the site reached more than 1.2 million at the end of September, up from 851,000 at the end of June.

The number of auctions hosted on EBay's site rose to 9.2 million in the third quarter from 6.6 million in the second quarter.

Shares of EBay surged Tuesday after rising 43 percent the previous session.

The run began after DLJ started coverage of the online sensation at a "buy" and set a $100 12-month target price on the stock. The San Jose, Calif.-based company went public in late September at $18 a share.

But DLJ analyst Jamie Kiggen wasn't waiting to give his extremely enthusiastic thumbs-up for the stock.

In his report, Kiggen wrote: "EBay displays all of the characteristics of an Internet category leader: a huge market opportunity, significant competitive barriers, an increasing returns business model, and a massive, loyal and growing customer base."

EBay allows Internet users to buy and sell things among each other in an auction format. EBay does not handle any of the goods being sold but charges sellers a listing fee of betwee 25 cents and $2 and then a successful transaction fee ranging between 1.25 percent and 5 percent of the cost of the good sold.

At the end of August, the company had more than 1.1 million accounts. Kiggen expects EBay will have 645,000 sellers at the end of 1999, each with a lifetime value of a little more than $6,500 each.

"We're not kidding when we say EBay's absolute size of market rivals that of Amazon, and its overall profitability rivals Yahoo!," he wrote. "We think the comparisons don't end there, and we would not be surprised if a few years from now we will have raised our target price several times."

One of the biggest fears associated with EBay is that other Internet sites, such as Yahoo! and Excite, which have started similar auction services that are fee for all users could steal market share or force EBay to cut its fees. Yet EBay Chief Executive Meg Whitman told that she is not too worried about the competition.

"The main two things that sellers are interested in [are] did their item sell and did they get the highest price they possible could have for the item," Whitman said. "If they get those two things and have to pay a small price to do it, they're happy to, relative to not getting those two things and have it be free."