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eBay (EBAY) Up 7.4% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for eBay (EBAY - Free Report) . Shares have added about 7.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is eBay due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
eBay Surpasses Earnings and Revenue Estimates in Q2
eBay reported second-quarter 2020 non-GAAP earnings of $1.08 per share, beating theZacks Consensus Estimate by 2.8%. The bottom line also improved 63.6% year over year and 40.2% sequentially.
Net revenues of $2.9 billion surpassed the Zacks Consensus Estimate of $2.8 billion. The top line was up 18% and 21% from the prior-year quarter on reported and FX-neutral basis, respectively. Further, the figure surged 20.7% from the prior quarter.
Solid performance of Marketplace platform across all the major end-markets drove the top line. Further, accelerating gross merchandise volume (GMV) of the company contributed significantly to the performance.
Further, solid momentum across its managed payments offerings, which has processed $4.7 billion of GMV for around42,000 sellers since its launch till date, was a major positive.
Further, eBay’s Promoted Listings delivered robust performance by generating revenues of $196 million in the second quarter, up 120% from the year-ago quarter. This can be attributed to growing momentum across sellers.
Additionally, the company witnessed year-over-year growth of 5% in the active buyer number.The active buyer base totaled182 million at the end of the second quarter.
Further, strong momentum across new customers was a tailwind. During the reported quarter, the company added 8 million new customers to its platform.
Stable cash flows, low capital intensity and disciplined capital management remain key catalysts. Further, strength across Marketplace platform courtesy of expanding buyer base and increasing traffic is a positive.
Further, the company’s growing initiatives toward strengthening managed payments offerings remain major positives. Further, eBay remains optimistic regarding growth initiatives, which are based on enhancing seller experience by offering innovative seller tools and delivering better buyer experience by utilizing structured data.
Owing to shelter-in-place protocol on account of coronavirus, the company is witnessing solid growth in e-commerce space, which has been benefiting from its Marketplace business. This is likely to act as a tailwind in the third quarter as well.
In July, eBay signed a definitive agreement to sell its Classifieds business to Adevinta. This move is likely to aid company’s focus toward strengthening its Marketplace business further.
GMV Details
The company’s total GMV of $27.1 billion in the second quarter exhibited year-over-year growth of 26% and 29% on reported and FX-neutral basis, respectively. Further, the figure surpassed the Zacks Consensus Estimate of $26.7 billion.
Notably, eBay’s GMV is entirely generated by Marketplace platform after the sale of StubHub. Marketplace GMV is categorised into two parts:
U.S. GMV totaled$10.5 billion, which accounted for 38.7% of total GMV, up 35% from the year-ago quarter.
International GMV was $16.6 billion, which accounted for 61.3% of total GMV, grew 22% on a year-over-year basis.
Revenues in Detail
eBay’s revenues are classified into two types:
Net Transaction: The company reported net transaction revenues of $2.4 billion in the reported quarter, accounting for 85.4% of the total revenues. Further, the figure was up 30% from the year-ago quarter. Notably, net transaction revenues are completely generated by the Marketplace platform whose strong performance in the second quarter drove year-over-year growth.
Marketing Services and Other: eBay generated $418 million of total marketing services and other revenues (14.6% of total revenues), which fell 22% from the year-ago quarter.This was due to sluggish performance of Marketplace that generated $221 million of these revenues, down 18% year over year. Further, Classifieds comprised $201 million revenues, down 26% year over year.
Operating Details
In the second quarter, eBay’s gross margin was 79.1%, expanding 190 basis points (bps) year over year.
Operating expenses of $1.4billion contracted 360 bps as a percentage of net revenues from the year-ago quarter.
Non-GAAP operating margin was 34.3% in the second quarter, expanding510 bps year over year.
Balance Sheet and Cash Flow
As of Jun 30, 2020, cash equivalents and short-term investments came in at $5.3 billion, up from $4.4billion as on Mar 31, 2020.
Further, eBay’s balance sheet is highly leveraged with a long-term debt of $8.2 billion at the end of the reported quarter compared with $7.7 billion at the end of the last reported quarter.
The company generated $964 million of cash from operating activities during the second quarter, down from $702 million in the previous quarter.
The company’s free cash flow stood at $866million during the reported quarter.
Further, the company repurchased $3 billion of shares and paid dividend of $112 million in the second quarter.
Guidance
For third-quarter 2020, eBay expects net revenues within the range of $2.64-$2.71 billion.
Non-GAAP earnings are anticipated in the range of81-87 cents.
For 2020, the company has raised guidance for net revenues from the range of $9.56-$9.76 billion to the band of $10.56-$10.75 billion.
The guidance for non-GAAP earnings per share has also been revised upward from $3.00-$3.10 to $3.47-$3.59.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 8.38% due to these changes.
VGM Scores
At this time, eBay has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, eBay has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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eBay (EBAY) Up 7.4% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for eBay (EBAY - Free Report) . Shares have added about 7.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is eBay due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
eBay Surpasses Earnings and Revenue Estimates in Q2
eBay reported second-quarter 2020 non-GAAP earnings of $1.08 per share, beating theZacks Consensus Estimate by 2.8%. The bottom line also improved 63.6% year over year and 40.2% sequentially.
Net revenues of $2.9 billion surpassed the Zacks Consensus Estimate of $2.8 billion. The top line was up 18% and 21% from the prior-year quarter on reported and FX-neutral basis, respectively. Further, the figure surged 20.7% from the prior quarter.
Solid performance of Marketplace platform across all the major end-markets drove the top line. Further, accelerating gross merchandise volume (GMV) of the company contributed significantly to the performance.
Further, solid momentum across its managed payments offerings, which has processed $4.7 billion of GMV for around42,000 sellers since its launch till date, was a major positive.
Further, eBay’s Promoted Listings delivered robust performance by generating revenues of $196 million in the second quarter, up 120% from the year-ago quarter. This can be attributed to growing momentum across sellers.
Additionally, the company witnessed year-over-year growth of 5% in the active buyer number.The active buyer base totaled182 million at the end of the second quarter.
Further, strong momentum across new customers was a tailwind. During the reported quarter, the company added 8 million new customers to its platform.
Stable cash flows, low capital intensity and disciplined capital management remain key catalysts. Further, strength across Marketplace platform courtesy of expanding buyer base and increasing traffic is a positive.
Further, the company’s growing initiatives toward strengthening managed payments offerings remain major positives. Further, eBay remains optimistic regarding growth initiatives, which are based on enhancing seller experience by offering innovative seller tools and delivering better buyer experience by utilizing structured data.
Owing to shelter-in-place protocol on account of coronavirus, the company is witnessing solid growth in e-commerce space, which has been benefiting from its Marketplace business. This is likely to act as a tailwind in the third quarter as well.
In July, eBay signed a definitive agreement to sell its Classifieds business to Adevinta. This move is likely to aid company’s focus toward strengthening its Marketplace business further.
GMV Details
The company’s total GMV of $27.1 billion in the second quarter exhibited year-over-year growth of 26% and 29% on reported and FX-neutral basis, respectively. Further, the figure surpassed the Zacks Consensus Estimate of $26.7 billion.
Notably, eBay’s GMV is entirely generated by Marketplace platform after the sale of StubHub. Marketplace GMV is categorised into two parts:
U.S. GMV totaled$10.5 billion, which accounted for 38.7% of total GMV, up 35% from the year-ago quarter.
International GMV was $16.6 billion, which accounted for 61.3% of total GMV, grew 22% on a year-over-year basis.
Revenues in Detail
eBay’s revenues are classified into two types:
Net Transaction: The company reported net transaction revenues of $2.4 billion in the reported quarter, accounting for 85.4% of the total revenues. Further, the figure was up 30% from the year-ago quarter. Notably, net transaction revenues are completely generated by the Marketplace platform whose strong performance in the second quarter drove year-over-year growth.
Marketing Services and Other: eBay generated $418 million of total marketing services and other revenues (14.6% of total revenues), which fell 22% from the year-ago quarter.This was due to sluggish performance of Marketplace that generated $221 million of these revenues, down 18% year over year. Further, Classifieds comprised $201 million revenues, down 26% year over year.
Operating Details
In the second quarter, eBay’s gross margin was 79.1%, expanding 190 basis points (bps) year over year.
Operating expenses of $1.4billion contracted 360 bps as a percentage of net revenues from the year-ago quarter.
Non-GAAP operating margin was 34.3% in the second quarter, expanding510 bps year over year.
Balance Sheet and Cash Flow
As of Jun 30, 2020, cash equivalents and short-term investments came in at $5.3 billion, up from $4.4billion as on Mar 31, 2020.
Further, eBay’s balance sheet is highly leveraged with a long-term debt of $8.2 billion at the end of the reported quarter compared with $7.7 billion at the end of the last reported quarter.
The company generated $964 million of cash from operating activities during the second quarter, down from $702 million in the previous quarter.
The company’s free cash flow stood at $866million during the reported quarter.
Further, the company repurchased $3 billion of shares and paid dividend of $112 million in the second quarter.
Guidance
For third-quarter 2020, eBay expects net revenues within the range of $2.64-$2.71 billion.
Non-GAAP earnings are anticipated in the range of81-87 cents.
For 2020, the company has raised guidance for net revenues from the range of $9.56-$9.76 billion to the band of $10.56-$10.75 billion.
The guidance for non-GAAP earnings per share has also been revised upward from $3.00-$3.10 to $3.47-$3.59.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 8.38% due to these changes.
VGM Scores
At this time, eBay has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, eBay has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.