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eBay (EBAY) Up 6.1% 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 6.1% 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 catalysts.
eBay Surpasses Earnings and Revenue Estimates in Q4
eBay reported fourth-quarter 2019 non-GAAP earnings of 81 cents, beating the Zacks Consensus Estimate by 8%. The reported figure also improved 14.1% year over year and 20.9% sequentially.
Net revenues of $2.82 billion also surpassed the Zacks Consensus Estimate by 0.4%. The top line was up 6.5% from the prior quarter.
However, it was down 2% on a year-over-year basis (flat on an FX-neutral basis). This can be attributed to slowdown in gross merchandise volume (GMV) due to sluggish contribution from Marketplace platform and StubHub.
Nevertheless, the company witnessed solid momentum across its managed payments offerings. Further, eBay’s Promoted Listings delivered robust performance by generating revenues of $136 million, up 73% from the year-ago quarter.
Additionally, the company witnessed growth of 2.2% in the active buyer number. The active buyers base came in at 183 million at the end of the fourth quarter.
The company’s growing initiatives toward strengthening its managed payments offerings and advertising revenues 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.
Moreover, integration between listing flows and Seller Hub remains a tailwind.
Notably, the company entered into a definitive agreement to sell StubHub to viagogo as a result of slowdown in StubHub’s volume.
GMV Details
Total GMV of $23.3 billion in the fourth quarter was down 5% year over year on a reported basis and 4% on an FX-neutral basis. Further, the figure missed the Zacks Consensus Estimate of $23.8 billion.
Marketplace GMV came in $21.9 billion (94.3% of total GMV), down 5.4% year over year. We note that U.S. GMV fell 9% from the year-ago quarter primarily due to imposition of Internet Sales tax. Further, international GMV was down 1% year over year thanks to uncertainties related to Brexit.
StubHub GMV came in $1.3 billion (5.7%), down 5.4% on a year-over-year basis due to sluggish landscapes in concerts and theatres.
Revenues in Detail
eBay’s revenues are classified into two types:
Net Transaction: The company generated $2.28 billion of net transaction revenues in total in the fourth quarter. The figure accounted for 80.9% of the total net revenues and declined 1% year over year. This can be attributed to sluggish performance of Marketplace and StubHub, which generated $1.97 billion and $305 million transaction revenues, down 0.4% and 1.9% from the prior-year quarter, respectively.
Marketing Services and Other: eBay generated $539 million of total marketing services and other revenues (19.1% of total revenues), which fell 7.4% from the year-ago quarter. This was due to sluggish performance of Marketplace that generated $259 million revenues, down 18% year over year.
Nevertheless, StubHub delivered marketing revenues $16 million during the reported quarter, significantly increasing from $3 million in the year-ago quarter. Further, Classifieds generated $269 million revenues, up 3% year over year.
Operating Details
In the fourth quarter, eBay’s gross margin was 76.9%, contracting 160 bps year over year.
Operating expenses of $1.55 billion expanded 20 bps as a percentage of net revenues from the year-ago quarter. This was due to the 80 bps and 290 bps respective expansion in product development and general & administrative expenses.
However, sales and marketing expenses contracted 340 bps year over year.
Consequently, non-GAAP operating margin was 29.3% in the fourth quarter, up 10 bps year over year.
Balance Sheet and Cash Flow
As of Dec 31, 2019, cash equivalents and short-term investments came in at $2.8 billion, down from $3.1 billion as on Sep 30, 2019.
Further, eBay’s balance sheet is highly leveraged, with a long-term debt of $6.7 billion at the end of the fourth quarter.
The company generated $811 million of cash from operating activities and had free cash flow of $672 million during the reported quarter.
Further, the company returned $1.1 billion to shareholders, which includes dividend payments worth $113 million, in the fourth quarter.
Guidance
For first-quarter 2020, eBay expects revenues within $2.55-$2.60 billion.
Non-GAAP earnings are expected within 70-73 cents per share.
For 2020, the company expects revenues between $10.72 billion and $10.92 billion, indicating FX-neutral growth of 1-3%.
The company expects Marketplace GMV to be down low-single-digit in 2020.
Adjusted earnings per share are expected within $2.95-$3.05.
The company has considered StubHub in the full year guidance.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 9.29% due to these changes.
VGM Scores
Currently, eBay has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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. It comes with little surprise eBay has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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eBay (EBAY) Up 6.1% 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 6.1% 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 catalysts.
eBay Surpasses Earnings and Revenue Estimates in Q4
eBay reported fourth-quarter 2019 non-GAAP earnings of 81 cents, beating the Zacks Consensus Estimate by 8%. The reported figure also improved 14.1% year over year and 20.9% sequentially.
Net revenues of $2.82 billion also surpassed the Zacks Consensus Estimate by 0.4%. The top line was up 6.5% from the prior quarter.
However, it was down 2% on a year-over-year basis (flat on an FX-neutral basis). This can be attributed to slowdown in gross merchandise volume (GMV) due to sluggish contribution from Marketplace platform and StubHub.
Nevertheless, the company witnessed solid momentum across its managed payments offerings. Further, eBay’s Promoted Listings delivered robust performance by generating revenues of $136 million, up 73% from the year-ago quarter.
Additionally, the company witnessed growth of 2.2% in the active buyer number. The active buyers base came in at 183 million at the end of the fourth quarter.
The company’s growing initiatives toward strengthening its managed payments offerings and advertising revenues 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.
Moreover, integration between listing flows and Seller Hub remains a tailwind.
Notably, the company entered into a definitive agreement to sell StubHub to viagogo as a result of slowdown in StubHub’s volume.
GMV Details
Total GMV of $23.3 billion in the fourth quarter was down 5% year over year on a reported basis and 4% on an FX-neutral basis. Further, the figure missed the Zacks Consensus Estimate of $23.8 billion.
Marketplace GMV came in $21.9 billion (94.3% of total GMV), down 5.4% year over year. We note that U.S. GMV fell 9% from the year-ago quarter primarily due to imposition of Internet Sales tax. Further, international GMV was down 1% year over year thanks to uncertainties related to Brexit.
StubHub GMV came in $1.3 billion (5.7%), down 5.4% on a year-over-year basis due to sluggish landscapes in concerts and theatres.
Revenues in Detail
eBay’s revenues are classified into two types:
Net Transaction: The company generated $2.28 billion of net transaction revenues in total in the fourth quarter. The figure accounted for 80.9% of the total net revenues and declined 1% year over year. This can be attributed to sluggish performance of Marketplace and StubHub, which generated $1.97 billion and $305 million transaction revenues, down 0.4% and 1.9% from the prior-year quarter, respectively.
Marketing Services and Other: eBay generated $539 million of total marketing services and other revenues (19.1% of total revenues), which fell 7.4% from the year-ago quarter. This was due to sluggish performance of Marketplace that generated $259 million revenues, down 18% year over year.
Nevertheless, StubHub delivered marketing revenues $16 million during the reported quarter, significantly increasing from $3 million in the year-ago quarter. Further, Classifieds generated $269 million revenues, up 3% year over year.
Operating Details
In the fourth quarter, eBay’s gross margin was 76.9%, contracting 160 bps year over year.
Operating expenses of $1.55 billion expanded 20 bps as a percentage of net revenues from the year-ago quarter. This was due to the 80 bps and 290 bps respective expansion in product development and general & administrative expenses.
However, sales and marketing expenses contracted 340 bps year over year.
Consequently, non-GAAP operating margin was 29.3% in the fourth quarter, up 10 bps year over year.
Balance Sheet and Cash Flow
As of Dec 31, 2019, cash equivalents and short-term investments came in at $2.8 billion, down from $3.1 billion as on Sep 30, 2019.
Further, eBay’s balance sheet is highly leveraged, with a long-term debt of $6.7 billion at the end of the fourth quarter.
The company generated $811 million of cash from operating activities and had free cash flow of $672 million during the reported quarter.
Further, the company returned $1.1 billion to shareholders, which includes dividend payments worth $113 million, in the fourth quarter.
Guidance
For first-quarter 2020, eBay expects revenues within $2.55-$2.60 billion.
Non-GAAP earnings are expected within 70-73 cents per share.
For 2020, the company expects revenues between $10.72 billion and $10.92 billion, indicating FX-neutral growth of 1-3%.
The company expects Marketplace GMV to be down low-single-digit in 2020.
Adjusted earnings per share are expected within $2.95-$3.05.
The company has considered StubHub in the full year guidance.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 9.29% due to these changes.
VGM Scores
Currently, eBay has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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. It comes with little surprise eBay has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.