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eBay (EBAY) Gears Up for Q1 Earnings: What's in the Cards?

Zacks Equity Research

eBay EBAY is set to report first-quarter 2019 results on Apr 23.

The company beat the Zacks Consensus Estimate in three out of the trailing four quarters, delivering average positive surprise of 7.32%.

In fourth-quarter 2018, adjusted earnings of 71 cents per share surpassed the Zacks Consensus Estimate by 16 cents. Gross revenues of $2.87 billion jumped 6.3% year over year (up 6% on an Fx-neutral basis) and surpassed the Zacks Consensus Estimate of $2.86 billion.

For the first quarter, eBay expects revenues to grow 0-2% on an Fx-neutral basis to $2.55-$2.60 billion. Non-GAAP earnings are projected within 62-64 cents per share.

The Zacks Consensus Estimate for first-quarter earnings and revenues is pegged at 63 cents and $2.58 billion, respectively. We expect eBay to perform well on the back of strength in its marketplace’s active users and net transaction revenues.

Shares of eBay have lost 9.6% in the past year against its industry's growth of 5.1%.

 

 

Marketplace Active Buyers to Drive Growth

In the first quarter, eBay’s Marketplace active buyers increased 5.3% from the year-ago period to 179 million. We expect significant additions in the to-be-reported quarter as well. The Zacks Consensus Estimate for this metric is currently pegged at 180 million.

eBay’s accelerated Artificial Intelligence (AI) efforts through personalization, image search technology and customer support are expected to strengthen the Marketplace platform.

The company has been giving more data to its marketplace sellers including price and restocking guidance, as well as more insight into inventory such as demand signals for the right products, price, and timing.

Notably, eBay offers a local feature that allows a customer to buy something online and then pick it up at a local store when convenient. This lowers shipping costs and helps boost growth of the Marketplace business.

Advertising & Payment Platform to Benefit eBay

eBay is progressing well with payment and advertising business. The company plans to invest aggressively in this segment in the near term. Within the advertising segment, the company witnessed robust growth in Promoting Listings.

Notably, in the last reported quarter, 600,000 sellers promoted more than 200 million listings. This led to a contribution of $80 million to the company’s total revenues in the last reported quarter.

Management expects its Advertising portfolio to contribute $1 billion to annual revenues in the next few years, which is a tailwind.

Robust GMV Growth to Benefit eBay

In the fourth quarter, Marketplace platform GMV grew 1.3% year over year on a reported basis and3% on an FX-Neutral basis to $23.2 billion, aided by continual expansion of new user experiences. The Zacks Consensus Estimate for the to-be-reported quarter is pegged at $22.04 billion.

StubHub accounted for $1.4 billion of GMV, down 1.4% on a year-over-year basis. The Zacks Consensus Estimate for the quarter to be reported is pegged at $1.07 billion.

Core Platform Strength to Drive Net Transaction Revenues

In a bid to increase total net transaction revenues, eBay has been strengthening its core platform and improving user experience. Notably, in the last reported quarter, eBay's total net transaction revenues were $2.3 billion.

The company continues to accelerate its efforts by building product catalogs on structured data, enhancing mobile platform, rolling out new browse-inspired shopping journeys, rejuvenating customer-to-customer (C2C) business and strengthening its brand.

The Zacks Consensus Estimate for net transaction revenues is currently pegged at $2.01 billion.

Overhangs

Increasing competition in the e-commerce market from companies like Amazon and Wal-Mart may affect its performance.

eBay's increased investment toward overall platform technology and slower growth rate compared to peers are overhangs. Moreover, its growth continues to suffer due to weak world economy. The company is heavily dependent on countries outside the United States for transaction and Internet sales. This is also cited as headwind as the United States is flourishing whereas emerging economies are slowing down.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

eBay currently has a Zacks Rank #2 and an Earnings ESP of 0.00%, making surprise prediction difficult.

eBay Inc. Price and EPS Surprise

 

eBay Inc. Price and EPS Surprise | eBay Inc. Quote

Stocks With Favorable Combination

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat in their respective quarters to be reported:

Xilinx, Inc. XLNX has an Earnings ESP of +1.75% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Verizon Communications Inc. VZ has an Earnings ESP of +0.02% and a Zacks Rank #3.

Waters Corporation WAT has an Earnings ESP of +1.23% and holds a Zacks Rank #3.

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eBay Inc. (EBAY) : Free Stock Analysis Report
 
Verizon Communications Inc. (VZ) : Free Stock Analysis Report
 
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