eBay's (EBAY) Q4 Earnings Beat Estimates, Revenues Dip Y/Y
eBay Inc. EBAY reported fourth-quarter 2022 non-GAAP earnings of $1.07 per share, which beat the Zacks Consensus Estimate by 1.9%. The bottom line increased 2% year over year.
Net revenues of $2.51 billion surpassed the Zacks Consensus Estimate of $2.46 billion. However, the figure decreased 4% from the year-ago quarter’s figure on a reported basis and 1% on an FX-neutral basis.
This was attributed to the softness of eBay’s Marketplace platform and weakening momentum among active buyers. EBAY witnessed a year-over-year decline of 9% in the active buyer base, which stood at 134 million at the end of the fourth quarter.
We note that the active buyer count stood at 132 million, excluding contributions from GittiGidiyor and TCGplayer acquisitions.
Further, eBay witnessed a declining gross merchandise volume (GMV) in the reported quarter, which remained an overhang.
Nevertheless, strengthening momentum across the advertising offerings of EBAY was a tailwind.
eBay’s Promoted Listings generated revenues of $276 million, up 19% on a reported basis and 27% on an FX-neutral basis from the prior-year quarter’s respective levels. This fueled the momentum across EBAY’s first-party advertising products.
Moreover, total advertising offerings yielded $319 million revenues, which grew 11.9% on a year-over-year basis.
Notably, from the fourth quarter of 2022 onwards, the company began presenting revenues generated from our Marketplace GMV and from non-GMV-based businesses as “net revenues”, which were previously classified into two types – “net transaction revenues” and “marketing services and other revenues”.
eBay Inc. Price, Consensus and EPS Surprise
eBay Inc. price-consensus-eps-surprise-chart | eBay Inc. Quote
GMV Details
EBAY’s total GMV of $18.23 billion in the reported quarter exhibited year-over-year declines of 12% and 6% on a reported and an FX-neutral basis, respectively.
Nevertheless, the reported GMV surpassed the Zacks Consensus Estimate of $17.9 billion.
The total GMV is categorized into two parts.
U.S. GMV totaled $8.9 billion, accounting for 48.8% of the total GMV, down 9% from the year-ago quarter’s level.
International GMV was $9.3 billion, accounting for 51.2% of the total GMV. It fell 15% on a year-over-year basis.
Operating Details
In the fourth quarter, eBay’s gross margin was 72.9%, contracting 50 basis points (bps) year over year.
Operating expenses of $1.3 billion rose 2.7% year over year. As a percentage of net revenues, the figure expanded 320 bps to 50.3% from the year-ago quarter’s level.
The non-GAAP operating margin was 29.9% in the fourth quarter, contracting 170 bps year over year.
Balance Sheet & Cash Flow
As of Dec 31, 2022, cash equivalents and short-term investments were $4.8 billion, up from $3.5 billion as of Sep 30, 2022.
Long-term debt was $7.72 billion at the end of the fourth quarter, up from $6.58 billion at the end of the third quarter.
EBAY generated $686 million in cash from operating activities in the fourth quarter, down from $735 million in the third quarter.
Its free cash flow stood at $533 million in the reported quarter.
eBay repurchased $300 million worth of shares and paid out dividends of $119 million in the reported quarter.
Guidance
For the first quarter of 2023, eBay expects revenues of $2.46-$2.50 billion. On an FX-neutral basis, the year-over-year growth in revenues is anticipated to be 1%-2%. On a spot rate basis, the same is expected between (1) % and 1%. The Zacks Consensus Estimate for revenues is pegged at $2.37 billion.
Non-GAAP operating margin is expected between 29.1% and 29.7%.
GMV for the first quarter is likely to be within the band of $18 billion and $18.3 billion, indicating a decline of 7%-6% on a spot rate basis and 5%-3% on an FX-neutral basis.
Non-GAAP earnings per share are anticipated between $1.05 and $1.09. The Zacks Consensus Estimate for the same is pegged at $1.06 per share.
Zacks Rank & Stocks to Consider
Currently, eBay carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the retail-wholesale sector are Ulta Beauty ULTA, Costco Wholesale COST and Ross Stores ROST, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ulta Beauty has gained 42.4% on a year-to-date basis. The long-term earnings growth rate for ULTA is currently projected at 13.75%.
Costco Wholesale has lost 1.6% on a year-to-date basis. The long-term earnings growth rate for COST is currently projected at 9.57%.
Ross Stores has gained 24.3% on a year-to-date basis. The long-term earnings growth rate for ROST is currently projected at 10.5%.
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