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eBay (EBAY) Surpasses Earnings and Revenue Estimates in Q1

Zacks Equity Research

eBay Inc. EBAY reported first-quarter 2019 pro-forma earnings of 67 cents, surpassing the Zacks Consensus Estimate by 4 cents. The reported figure also improved 26.4% year over year.

Gross revenues of $2.6 billion increased 6% year over year (up 4% on an Fx-neutral basis) and surpassed the Zacks Consensus Estimate of $2.58 billion.

Following better-than-expected results in the first quarter, its shares gained 1.4%. However, the company’s shares have lost 7.6% over the past year against its industry’s gain of 6.3%.

The company continues to leverage structured data and Artificial Intelligence (AI) to improve user experience on its platform. Notably, this aided in the growth of active buyers on its platform, in turn driving GMV. Robust growth of Advertising and Payment platform drove eBay’s top-line growth.

Revenues and GMV

In the first quarter, the Marketplace platform accounted for$2.2 billion of revenues, up 3% year over year on a reported basis and 4% on an FX-Neutral basis. Marketplace GMV was $21.6 billion, down 4% year over year on a reported basis and 1% on a FX-Neutral basis. The increase was aided by continual expansion of new user experiences.

StubHub contributed $1 billion of GMV, down 3% on a year-over-year basis, and revenues of $230 million, flat with the year-ago quarter.

Classifieds platforms performed pretty well during the quarter, contributing $256 million to revenues, up 4% year over year and 12% on a FX-Neutral basis.

Total GMV of $22.6million in the first quarter was down 4% year over year on a reported basis and 1% on an Fx-neutral basis.

During the quarter, global active buyers/customers increased 4% from the year-ago period to 180 million.

Margins and Income

Pro-forma gross margin in the quarter was 77.3%, down 100 basis points (bps) year over year.

Adjusted operating expenses of $1.35 billion decreased 0.9% from the prior-year quarter. As a percentage of sales, sales and marketing and product development expenses decreased, while general & administrative costs increased.

Non-GAAP operating margin was 29.8% in the first quarter, up 190 bps year over year.

Balance Sheet and Cash Flow

eBay’s balance sheet is highly leveraged, with a long-term debt of $7.7 billion. Cash and short-term investments balance was $4.4billion at the end of the first quarter versus $4.9 billion in fourth-quarter 2018.

eBay generated $550 million in cash from operating activities and spent $182 million on capex. Free cash flow during the quarter was $368 million and the company repurchased shares worth $1.5 billion.

In addition, it paid $125 million in cash dividends during the first quarter.

Guidance

For the second quarter of 2019, eBay expects revenues to grow 2-4% on an Fx-neutral basis to $2.64-$2.69 billion. The Zacks Consensus Estimate for second-quarter revenues is pegged at $2.66 billion. Non-GAAP earnings are expected within 61-63 cents and the Zacks Consensus Estimate for the same is pegged at 60 cents. GAAP earnings per share from continuing operations are expected in the range of 41-45 cents.

eBay increased its full-year revenue guidance for 2019. The company now expects full-year revenues between $10.83 billion and $10.93 billion, representing Fx-neutral growth of 2- 3%.The corresponding Zacks Consensus Estimate is pegged at $10.87 billion.

Adjusted earnings per share are expected within $2.64-$2.70. The Zacks Consensus Estimate for the metric is pegged at $2.67 per share.

eBay Inc. Price, Consensus and EPS Surprise

 

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

Zacks Rank and Key Picks

Currently, eBay carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Amazon AMZN, Ctrip.com International, Ltd. CTRP and Square SQ, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Amazon, Ctrip.com and Square is currently projected at 31.2%, 23% and 25%, respectively.

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