Today started out as though we were going to break the losing streak. After a mixed trading day we markets indeed ended up higher to gain ground rather than posting a third day of triple-digit losses. Oil started out higher this morning, getting back over $116 per barrel before coming back down slightly.
Hewlett-Packard Co. (NYSE: HPQ) came out with strong earnings last night and guided inline to higher without the EDS integration. Shares were up almost 6% at $46.29 at the end of the day. This name alone is probably responsible for more cheers than any today as 32 million shares changed hands.
U.S. stock futures were higher Wednesday morning, indicating markets could start on a positive note after two days of declines. Good results from Hewlett-Packard helped lift sentiment, overshadowing financial sector concerns, despite new worries over Fannie and Freddie. Oil remained steady ahead of inventory report later today.
Hewlett-Packard (NYSE: HPQ) shares are rising over 3% in premarket trading after the computer maker reported a 14% rise in fiscal third-quarter earnings and issues current-quarter earnings guidance that exceeded analyst estimates. Tech shares could get a boost from H-P.
Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) remain in focus due to concerns that a government bailout of the two firms is inevitable and would mean wiping out investors. Freddie Mac on Tuesday was forced to pay its steepest borrowing premium in 10 years, which is raising fresh concerns about its ability to withstand the housing and credit crisis without government help.
eBay Inc. (NASDAQ: EBAY) is cutting fixed-price seller listing fees. eBay will now charge 35 cents to list any number of the same types of fixed-price items. This is a dramatic change from charging fees based on item price.
In a move that the company wisely decided not to announce via a press release to investors, eBay (NASDAQ: EBAY) has lowered the listing fee for fixed-price items on its site to 35 cents, down from as high as $4, depending on the price. The listing duration will also jump from 7 days to 30; those changes will be at least partially offset by an increase in the commission on sold items but eBay did not break down any details on that. According (subscription required) to The Wall Street Journal, "The company is playing catch-up to other Web sites that have focused on fixed-price sales."
That may be true for now but the fact that eBay feels a need to court that market with aggressive price cuts indicates that the company recognizes the many sellers are opting for that over its own flagship auction business. Almost since inception, eBay has miraculously managed to avoid a price battle with competitors, and has been able to steadily increase its fees while much-hyped and well-funded imitators like Auction Universe fell by the wayside. It may be that sites like Amazon (NASDAQ: AMZN) are finally posing a serious threat.
It also may be that eBay is just messing with people's minds. Back in February when eBay announced its last "fee cut", sellers protested, alleging that the increase in the commission more than offset the decrease and accused eBay of fuzzy math.
Details of the new fee structure will tell us whether eBay is desperate of just manipulative.
When eBay, Inc. (NASDAQ: EBAY) recently began focusing on being more of a retail storefront than an online auction site, many saw it as the nail in the coffin of what was once an internet darling. Higher fees, angry sellers and a multitude of changes at eBay in recent years have many writing the company off as progress peaked in 2004 and has been falling ever since. Even former CEO Meg Whitman did not waste a chance on going over her self-imposed 10-year stint as the company's leader, having now left the company as of last year.
To add insult to injury, free classified listings are popping up all over the web to take over for what made eBay so powerful: connecting buyers and sellers for a transaction outside of the normal retail landscape. This grassroots commerce is what made eBay what it is. Its customers -- buyers and sellers -- did not want a normal retail transaction; they wanted a flea market and that is what eBay became. Except, that "flea" became an 800-pound gorilla.
Free classified providers like Oodle are winning business all over the web for niche audiences like those at MySpace.com and Walmart.com, two of Oodle's larger customers. Even localized free classified websites like Oklahoma City's OK4Free.com are getting in on the action. These are free websites to list items on -- unlike eBay. And they could be eating eBay's lunch soon if not already. To some who think eBay is turning into an also-ran in the online classified business, the welcome (albeit, smaller) competition is a good thing. Now, if someone could build a directory of all these free classified sites, customer defection from eBay could be quite a bit more rapid.
U.S. stock futures are higher Wednesday morning, a day after markets rallied around 2.4% due to declining oil prices. But today, ADP monthly employment data will be released, as well as weekly oil inventories data. Investors will digest the numbers and the slew of earnings due for release.
Already reported this morning (to name a few):
Comcast (NASDAQ: CMCSA) said its second-quarter profit rose 8% as cable TV rates rose and consumers ordered more digital and premium services. While the results fell short of Wall Street's forecast, CMCSA shares are trading mildly higher.
Arcelor Mittal (NYSE: MT) said its second-quarter profit more than doubled due to increased production and higher steel prices. It also gave an upbeat outlook for third quarter. The company outperformed consensus by about 20% at the revenue. MT shares, which have already close 7% higher Tuesday, are trading up another 6% in premarket action.
Garmin (NASDAQ: GRMN) shares are crashing, trading 11% lower in premarket action after the company reported quarterly profit that was above market estimates, but revenue missed expectations and 2008 outlook was cut due to macroeconomic conditions and high fuel prices that have already impacted growth.
Office Depot (NYSE: ODP) shares are over 1.7% lower in premarket trading after reporting a second-quarter loss as declining spending by smaller businesses and retail customers hurt sales.
Siemens (NYSE: SI) reported that "third quarter net profit fell 31% due to a one-time gain a year earlier, but order intake and revenue rose, beating expectations and showing the industrial conglomerate's resilience so far to the economic downturn." SI shares are 3.9% higher in premarket trading.
Corning (NYSE: GLW) shares are down over 2% in premarket trading after reporting inline earnings per share, but revenue slightly below estimates.
IAC/InterActive (NASDAQ: IACI) said it swung to a second-quarter loss, hurt by a $300 million charge in its Cornerstone Brands business. Adjusted earnings were 35 cents per share as revenue rose 7% to $1.6 billion. Analysts polled by Thomson Financial expected profit of 31 cents per share on $1.6 billion in sales.
eBay, Inc. (NASDAQ: EBAY) shares are falling today on no obvious news, but after CNBC analyst and BloggingStocks.com's own Jim Cramer said on his Mad Money TV show last night that he could not get behind the company, and that someone should buy them "and put them out of their misery." When Cramer talks, people have a habit of acting, so this could be the reason for the company's swoon. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on eBay.
After hitting a one-year high of $40.73 in October, the stock hit a one-year low of $23.52 last week. This morning, EBAY opened at $25.21. So far today the stock has hit a low of $24.75 and a high of $25.41. As of 1:45, EBAY is trading at $24.80, down 0.58 (-2.3%). The chart for EBAY looks bearish and steady, while S&P gives the stock its highest 5 STARS (out of 5) strong buy rating.
For a bearish hedged play on this stock, I would consider an October bear-call credit spread above the $30 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in three months as long as EBAY is below $30 at October expiration. eBay would have to rise by more than 20% before we would start to lose money. Learn more about this type of trade here.
RBC downgraded Best Buy (NYSE:BBY) to "outperform" from "top pick", according toBriefing.com. The news service also reports that JP Morgan upgraded United Airlines (NASDAQ:UAUA) to "overweight" from "underweight".
Coca Cola (NYSE:KO) removed from Goldman Sachs Conviction Buy List, according to24/7 Wall St.. The financial site also reports that EBay (NASDAQ:EBAY) Cut to Neutral from Buy at Goldman Sachs.
Douglas A. McIntyre is an editor at 247wallst.com.
MOST NOTEWORTHY: eBay (EBAY), Wells Fargo (WFC) and ASML Holdings (ASML) were today's noteworthy downgrades:
Thomas Weisel downgraded shares of eBay (NASDAQ:EBAY) following the company's Q2 results, as they did not see an improvement in the underlying fundamentals. Goldman lowered eBay to Neutral from Buy and cut its target to $30 from $38.
UBS downgraded Wells Fargo (NYSE:WFC) to Neutral from Buy citing valuation and reduced capital flexibility.
Merrill downgraded shares of ASML Holdings (NASDAQ:ASML) to Underperform from Neutral as they believe the company's demand slowdown could carry into next year.
OTHER DOWNGRADES:
Starbucks (NASDAQ:SBUX) was cut to Neutral from Buy at Piper.
U.S. stock futures edged higher Thursday morning, a day after market staged a big rally. Investors this morning are bracing for some housing data, but more importantly, a wave of earnings. Already better-than-expected earnings from J.P. Morgan Chase boosted stock index futures from earlier declines this morning.
On Wednesday, bulls finally came back in drove to but equity as oil price continued its decline and airlines and Wells Fargo (NYSE: WFC) reported results that Wall Street found encouraging, sending airline and financials stocks through the roof. The Dow Jones Industrial Average ended a three-day losing streak, jumping 276.74 points, or 2.5%. The S&P 500 climbed 30.45 points, or 2.5%, and the Nasdaq Composite gained 69.14 points, or 3.1%.
Still, all this sentiment might yet evaporate, or be seriously damped after housing data is released at 8:30 a.m. EDT. Building permits and housing starts for June are due out at that time. Also, weekly jobless claims will continue to paint the picture of the goings on in the labor market. At 10:00 a.m., the Philadelphia Fed index for July will be reported.
It would be interesting to see how the data and earnings play out. Already, J.P. Morgan Chase (NYSE: JPM) reported it profit sank 53% in the second quarter to $2.00 billion, or 54 cents per share. That beat estimates of 44 cents share. JPM shares are up over 5.5% in premarket trading.
eBay, Inc. (NASDAQ: EBAY) Q2 2008 Earnings Conference Call July 16, 2008 5:00 PM ET
Management Summary
Operator
Good day and welcome, everyone to eBay's Q2 2008 earnings results conference call. Today's call is being recorded.
With us today from the company is the Chief Executive Officer John Donahoe and the Chief Financial Officer Bob Swan. At this time, I would like to turn the conference over to Mark Rowen, VP of Investor Relations. Please go ahead, sir.
Mark Rowen, Vice President of Investor Relations
Thank you, operator. Good afternoon, everyone. Thanks for joining us and welcome to eBay's earnings release conference call for the second quarter of 2008. Joining me today on the call are John Donahoe, our President and Chief Executive Officer; and Bob Swan, our Chief Financial Officer.
It's funny how deadlines are sometimes so disconnected from what's really going on. Yes, eBay Inc. (NASDAQ: EBAY), the online auctioneer, beat analyst estimates coming in with earnings of 43 cents per share, compared to expectations of 41 cents. Yes, its earnings growth was a not-too-shabby 22%. And yes, PayPal remained its bright spot, with a 33% revenue growth. But eBay shares are trading down 7% in after-hours due to a soft outlook.
Is it just the soft outlook though? Most companies give a lower guidance these days as the weakening U.S. economy is hurting business. I'm sure some of eBay's softer outlook could indeed be attributed to the weakening economic conditions, but once they start digging deeper into the metrics, many on the Street aren't happy. For example, the 20% revenue growth -- or more specifically, the 13% revenue growth at eBay's Marketplace -- doesn't reflect the actual business very well, as advertising and increasing take rates have been contributing more and more. In fact, Silicone Alley Insider has no problem proclaiming that eBay growth is grinding to a halt, saying that "Transaction revenues grew just 9% year-over-year, vs. 14% y/y growth last quarter and 23% y/y growth during Q2 2007."
Then we have gross merchandise volume, or GMV, where analysts had been expecting a 12% growth. Not only did eBay post only an 8% year-over-year growth, but it posted a 2% decline sequentially. Another disappointment was the new listings numbers, which totaled 666.9 million, up 19% year-over-year and 3% sequentially.
Marketplace -- that's where the problems lie, and that's where investors would like to see improvements most; Skype and PayPal are growing well. Thing is, Marketplace isn't such a market place anymore. I'm not even sure how eBay can fix that. The internet and its users have evolved and I don't know that eBay fits the bill anymore. Just like Yahoo!, eBay is a mature company in the lifespan of the internet, and both have their glory days behind them. I wouldn't touch eBay stock as I don't see it going anywhere with its current business model.
Shares of eBay Inc. (NASDAQ: EBAY) are up about 2% today, ahead of the announcement of its quarterly financial results after the close. What to expect when the online auction site reports?
Well, if you're interested in numbers, eBay indicated that second-quarter earnings will be between 30 and 32 cents per share, or between 39 and 41 cents per share on an adjusted basis. The company also predicted revenue of $2.1 to $2.15 billion. Analysts polled by Thomson Financial expect eBay to be pretty much in-line with estimates, or just slightly better, and post adjusted earnings of 41 cents per share on revenue of $2.17 billion.
According to Jefferies & Co., eBay experiences "strong Marketplaces listings growth and ongoing strength in payments and non-gross merchandise value, or GMV, businesses." On Tuesday, RBC Capital Markets maintained its Sector Perform rating on eBay, but reduced the target price from $40 to $35 due to "continued transition of the company's platform and low visibility into the core marketplaces platform," and due to some misgivings about month-to-month worsening trends. However, Morgan Stanley, Citigroup and Banc of America actually raised estimates recently.
The plunge in oil prices and Intel's good earnings report from Tuesday were not enough to lift mood on Wall Street this morning. Investors, worried about a wave of data, earnings and Bernanke's second day of testimony, pushed U.S. stock futures lower. However, after yesterday's wild swings in the market, we may yet see futures change directions several times before the open.
On Tuesday, the session was marred by wild and volatile trading, induced by concerns over financials in general and Fannie Mae and Freddie Mac in particular. The steep drop in oil prices -- over $6 a barrel -- offset somewhat Federal Reserve Chairman Ben Bernanke's bleak testimony. Sill, the Dow Jones Industrial Average ended 92 points, or 0.84%, lower to close under the 11,000 mark. The S&P 500 dropped 13 points, or 1.09%, while the Nasdaq Composite, in anticipation of Intel's earnings, rose 2 points, or 0.13%.
Today, more economic data and earnings will affect the Street's sentiment. At 8:30 a.m. EDT, consumer price index -- inflation at the consumer level -- for June is due out. Again, there is a big difference between expected CPI and core CPI, which excludes food and energy prices. At 9:00 a.m., May net foreign purchases will be reported and shortly after, June industrial production and capacity utilization. At 2:00 p.m., investors could go over the released minutes from the last Federal Reserve meeting.
Meanwhile, Bernanke will continue his testimony that is due to start at 10 a.m. EDT.
Today started out as though we were going to break the losing streak. After a mixed trading day we markets indeed ended up higher to gain ground rather than posting a third day of triple-digit losses. Oil started out higher this morning, getting back over $116 per barrel before coming back down slightly. 
In a move that the company wisely decided not to announce via a press release to investors, 
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It's funny how deadlines are sometimes so disconnected from what's really going on. Yes, 
Shares of 
The plunge in oil prices and Intel's good earnings report from Tuesday were not enough to lift mood on Wall Street this morning. Investors, worried about a wave of data, earnings and Bernanke's second day of testimony, pushed U.S. stock futures lower. However, after yesterday's wild swings in the market, we may yet see futures change directions several times before the open.
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