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eBay's (EBAY) Earnings & Revenues Surpass Estimates in Q3

Zacks Equity Research

eBay Inc. EBAY reported third-quarter 2019 non-GAAP earnings of 67 cents, beating the Zacks Consensus Estimate by 2 cents. The reported figure also improved 19.6% year over year.

Net revenues of $2.65 billion also surpassed the Zacks Consensus Estimate of $2.64 billion. The top line was flat on a year-over-year basis (up 2% on an FX-neutral basis).

The company witnessed strong performance by its Classifieds platform during the reported quarter. Further, eBay experienced strong momentum across its managed payments offerings, which processed over $500 million worth of payments during the third quarter.

However, StubHub volume failed to exhibit year-over-year growth which affected eBay’s gross merchandise volume (GMV).

eBay’s shares have plunged almost 8% in pre-market trading which can be blamed on the disappointing fourth-quarter guidance.

Nevertheless, the company’s introduction of tools, advanced features and seller protections is likely to aid its momentum among customers and sellers in the near term.

Coming to price performance, eBay has returned 39.7% on a year-to-date basis, outperforming the industry’s gain of 17.2%.



Revenues and GMV

In the second quarter, the Marketplace platform accounted for $2.1, down 1% year over year on a reported basis and up 1% on an FX-Neutral basis. Further, Marketplace GMV was $20.5 billion, down 5% year over year on a reported basis and 2% on a FX-Neutral basis.

StubHub contributed $1.2 billion of GMV, flat with the year-ago quarter level. It generated $306 million of revenues, up 5% on a year-over-year basis.

The Classifieds platforms performed well during the quarter, contributing $265 million to revenues, up 4% year over year on a reported basis and 8% on an FX-Neutral basis.

Total GMV of $21.7 million in the third quarter was down 4% year over year on a reported basis and 2% on an FX-neutral basis.

During the quarter, global active buyers/customers increased 4% from the year-ago period to 183 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

In the third quarter, eBay’s gross margin was 76.4%, down 60 basis points (bps) year over year.

Adjusted operating expenses of $1.49 billion increased 0.3% from the prior-year quarter. This was due to the 1.9% and 14.1% respective hike in product development and general & administrative expenses.

Non-GAAP operating margin was 26.6% in the third quarter, up 20 bps year over year.

Balance Sheet and Cash Flow

As of Sep 30, 2019, cash equivalents and short-term investments came in at $3.1 billion, down from $4.5 billion as on Jun 30, 2019.

Further, eBay’s balance sheet is highly leveraged, with a long-term debt of $7.2 billion at the end of the third quarter.

The company generated $1 billion of cash from operating activities and had free cash flow of $913 million during the reported quarter. It made dividend payments worth $115 million.

Guidance

For the fourth quarter of 2019, eBay expects revenues within $2.77-$2.82 billion. The Zacks Consensus Estimate for the same is pegged at $2.85 billion.

Non-GAAP earnings are expected within 73-76 cents and the Zacks Consensus Estimate for the same is pegged at 77 cents.

For 2019, the company expects revenues between $10.75 billion and $10.80 billion, indicating FX-neutral growth of 2-3%. The corresponding Zacks Consensus Estimate is pegged at $10.82 billion.

Adjusted earnings per share are expected within $2.75-$2.78. The Zacks Consensus Estimate for the metric is pegged at $2.75.

Zacks Rank & Other Stocks to Consider

Currently, eBay carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the broader technology sector are Stamps.com STMP, Booking Holdings BKNG and Carvana CVNA. While Stamps.com sports a Zacks Rank #1 (Strong Buy), Booking Holdings and Carvana carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Stamps.com, Booking Holdings and Carvana is currently pegged at 15%, 13.08 and 9%, respectively.

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