EBay shares fall on lower earnings outlook

((January  30) Even though eBay Inc. did well in the fourth quarter and also introduced its first ever dividend this was overshadowed by the forecast for the March quarter which was below estimates and disappointing growth in revenues during the holiday quarter.

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The negatives

The shares were down a full one percent in after hours trading subsequent to a move up after the company announced it would be paying a dividend of 14 cents a share each quarter.

The company is facing demands from activist shareholders that they sell some divisions and restructure as the company is facing fierce competition from other online retailers such as Amazon.

Even though more buyers are using the eBay platform the company reported consumer spending was slow during the busy shopping period.

Detailed figures presented a bit more optimistically can be found here, with the article pointing out: "Gross revenues of $2.87 billion increased 6.3% year over year (up 6% on an Fx-neutral basis) and were within the guided range of $2.85-$2.89 billion. Moreover, revenues surpassed the Zacks Consensus Estimate of $2.86 billion. The company continues to leverage its structured data and Artificial Intelligence (AI) to improve user experience on its platform. Notably, this aided in growth of active buyers on its platform, which drove GMV. Further, robust growth of Advertising and Payment platform drove eBay’s top-line growth."

CEO claims company to boost volume in the longer term

Although eBay CEO Devin Wenig predicted that there would be pressure on the company's gross merchandise volume (GMV), that is the value of all the products sold on its website because it had reduced some marketing expenditures, he was sure that the company would benefit from new sales and a payments initiative that would boost GMV over the longer term. Wenig said in a conference call with analysts: “We believe that the actions we’re taking in ‘19 will set us up well."

Some figures

The company forecast revenue of $2.55 billion to $2.60 billion for the current quarter. Analysts had a target of $2.66 billion.

GMV rose just one percent in the December quarter again missing analysts' estimates. Also, it dipped in the US.

However, it was not all bad news as the last quarter of 2018 showed that eBay's sales actually climbed 6.8 percent year over year reaching $2.88 billion actually bettering estimates.

The number of users of eBay also has grown. At the end of December the company had 179 million active buyers, an increase of about 2 million above the previous quarter. The company also increased its share buybacks by a huge $4 billion after pressure from activist investors.

eBay’s quarterly profit reached $763 million, compared with a loss of $2.6 billion a year earlier, when eBay recorded a one-time expense of more than $3 billion.

Tom Forte, an analyst at D.A. Davidson said: “The hope for eBay, in my opinion, is their ability to supplement the marketplace with advertising and a growing payments business, but I think the core marketplace is still a challenged business.”

Previously published on Digital Journal