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eBay (EBAY) Surpasses Earnings and Revenue Estimates in Q2

Zacks Equity Research

eBay Inc. EBAY reported second-quarter 2019 pro-forma earnings of 68 cents, surpassing the Zacks Consensus Estimate by 6 cents. The reported figure also improved 28.3% year over year.

Moreover, gross revenues of $2.69 billion increased 2% year over year (up 4% on an Fx-neutral basis) and surpassed the Zacks Consensus Estimate by 0.5%.

Following better-than-expected results in the second quarter, its shares gained 6.02%. In addition, the company’s shares have gained 8.8% over the past year against its industry’s decline of 10.2%.

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

Revenues and GMV

In the second quarter, the Marketplace platform accounted for$2.2 billion of revenues, up 1% year over year on a reported basis and 3% on an FX-Neutral basis. The increase was aided by continual expansion of new user experiences. However, Marketplace GMV was $21.5 billion, down 5% year over year on a reported basis and 1% on a FX-Neutral basis.

StubHub contributed $1.1 billion of GMV, up 5%, and $264 million in revenues, increasing 7% on a year-over-year basis.

Classifieds platforms performed pretty well during the quarter, contributing $271 million to revenues, up 5% year over year and 12% on an FX-Neutral basis.

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

During the quarter, global active buyers/customers increased 4% from the year-ago period to 182 million.

eBay Inc. Price, Consensus and EPS Surprise

 

eBay Inc. Price, Consensus and EPS Surprise

eBay Inc. price-consensus-eps-surprise-chart | eBay Inc. Quote

Margins and Income

Pro-forma gross margin in the quarter was 76.6%, down 80 basis points (bps) year over year.

Adjusted operating expenses of $1.41 billion decreased 9.3% from the prior-year quarter. As a percentage of sales, sales and marketing& product development expenses, as well as general & administrative costs decreased.

Non-GAAP operating margin was 26.9% in the second quarter, up 170 bps year over year.

Balance Sheet and Cash Flow

eBay’s balance sheet is highly leveraged, with a long-term debt of $7.2 billion. Cash and short-term investment balance was $4.5 billion at the end of the second quarter versus $4.4 billion in first-quarter 2019.

It generated $744 million in cash from operating activities and spent $182 million on capex. Free cash flow during the quarter was $607 million. The company repurchased shares worth $1.5 billion.

In addition, it paid $120 million in cash dividends during the second quarter.

Guidance

For the third quarter of 2019, eBay expects revenues to grow 1-3% on an Fx-neutral basis to $2.61-$2.66 billion. The Zacks Consensus Estimate for third-quarter revenues is pegged at $2.68 billion. Non-GAAP earnings are expected within 62-65 cents and the Zacks Consensus Estimate for the same is pegged at 63cents. GAAP earnings per share from continuing operations are expected in the range of 40-44 cents.

For full-year 2019, the company expects revenues between $10.75 billion and $10.83 billion, indicating Fx-neutral growth of 2-3%.The corresponding Zacks Consensus Estimate is pegged at $10.93 billion.

Adjusted earnings per share are expected within $2.70-$2.75. The Zacks Consensus Estimate for the metric is pegged at $2.69 per share.

Zacks Rank and Other Key Picks

Currently, eBay carries a Zacks Rank #1 (Strong Buy). Other top-ranked stocks in the broader technology sector include Expedia Group, Inc. EXPE, Dropbox, Inc. DBX and Ctrip.com International, Ltd. CTRP, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Expedia, Dropbox and Ctrip.com is currently projected at 12.3%, 14.2% and 15%, respectively.

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