EBay (Nasdaq: EBAY) Stock Rises Following Q2 Earnings – Here Are the Main Points

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(This story was updated Thursday, July 17, 2014) EBay Inc. (Nasdaq: EBAY) stock was up 1.4% in after hours Wednesday - and continued the climb Thursday morning - after the company very narrowly missed analysts' expectations with its second-quarter earnings release.

EBAY stock

The most notable number: eBay grew sales by 13% from the same period last year. The online auctioneer reported sales of about $4.37 billion, just under the average analyst estimate of $4.38 billion, and netted earnings of $676 million for a 5.6% increase from the second quarter last year, and non-GAAP $0.69 earnings per share (EPS), just above the analysts' average estimate of $0.68 EPS.

The revenue growth was driven by a 26% increase in enabled commerce volume - a measure of the company's transactions - to $61.6 billion. This represented an almost $13 billion increase over last year.

"In a challenging second quarter, our commerce and payments platforms delivered strong enabled commerce volume growth of 26 percent," said eBay Inc. President and CEO John Donahoe in the quarterly report. "PayPal generated another strong quarter while eBay's growth was hampered by its global password reset for all users. We continued our momentum in the four competitive commerce battlegrounds of mobile, local, global, and data. We delivered new experiences for PayPal and eBay customers, extended PayPal and eBay into new markets, made it simple and easy for developers to integrate PayPal, and offered new ways to help merchants grow."

Mobile enabled commerce volume advanced 68%, a $12 billion year-over-year growth, and the company gained 4.1 million new users for a 15% year-over-year gain and a total of 152.5 active registered accounts.

Net payments increased 21% year over year to 850.2 million, up from last year's 834.4 million.

The biggest challenge for eBay came in May when the company discovered a cyber-attack on its network that compromised a database of user passwords. Users were prompted to reset their passwords, which President and CEO John Donahoe said "hampered" EBAY's growth.

However, Morningstar analyst R.J. Hottovy wrote in an analyst report that EBAY protected its network effect - where a network's value increases with more active users - through its response to the data breach.

"We believe management took appropriate measures to protect its network effect...in asking Marketplaces users to change passwords," Hottovy wrote, "Even if it comes at the expense of near-term user engagement levels and profitability."

Gross merchandise volume growth slowed to 7% in the second quarter due to "the one-two punch of a data breach and changes to Google's search algorithm," Hottovy wrote, but has recovered modestly because of EBAY'S response to the breach, which included "couponing, seller incentives, and marketing investments," for its Marketplaces users.

Morningstar has given the online retailer a positive long-term outlook, and EBAY expects third quarter sales of between $4.3 and $4.4 billion, which would be about 13% growth over last year's third quarter, and non-GAAP EPS of about $0.65 to $0.67 according to SEC documents.

Its biggest challenge ahead will be competition from Amazon and Google in the online marketplace and its stock is sensitive to changes in revenue growth expectations, Morningstar writes.

On the day of earnings, eBay stock slid 0.2% to $50.70 before climbing in after-hours trading. It was up 1.2% to $51.31 in early trading Thursday. For more on eBay stock in 2014, go here.

More from earnings season: A drop in mortgage originations and steep legal fees has come down hard on Bank of America this SEC filing period. See how the nation's leading financial institution and other big banks have fared this quarter...