Few Misconceptions which eBay Inc (EBAY) Cleared With Earnings


After spinning-off PayPal Holdings Inc (NASDAQ:PYPL), eBay Inc (NASDAQ:EBAY) reported its earnings for the first time. Wall Street appeared to have been expecting something bad from the company. However, the misconception about it has been cleared by the online auctioneer. Not only that, it could clear the air on several other issues to bring back the confidence of investors on the company’s existing business model. Clearly, the results suggested that it can survive without the payment processing division and also grow. However, it could not prevent the unfavorable impact of the foreign currency. The renewed confidence in the stock was seen in the extended hours of trading on Thursday.

Revival Working Out Well

The worst to happen to eBay Inc (NASDAQ:EBAY) was to kick itself out of the broader Index, S&P500, component to be replaced by Paypal Holdings Inc (NASDAQ:PYPL). However, the results for the third quarter suggest that the revival path laid out by its CEO, Devin Wenig, seems to be working out well. But, it cannot rest content with it as there are some other issues to be looked into. For instance, the online auctioneer admitted some unfavorable impact from the changes made by Alphabet Inc (NASDAQ:GOOGL)’s Google search practices. However, it was also seeing some progress being made in its focus to collect more structured data. The company expressed its hope that the enhanced ability to find listings in a wider web search would help them in the long run.

EBay Inc (NASDAQ:EBAY)’s CEO, Wenig, also admitted to analysts that there were more work to do, and the third quarter results were in the right direction. He said that he could see some impact from some change that was made to relieve the sales process. That was particularly evident in respect of small, as well as, mid-sized sellers as some of them have the potential to generate over a million dollars of revenue. The active buyers increased to 159 million in the third quarter from 157 million in the second quarter.

Search Assumes Key Proportion

During the conference call, eBay Inc (NASDAQ:EBAY)’s CEO was asked to quantify the probable time to create more structured data for SEO. Wenig did not provide any time frame but said that it would take time. However, he said that search is a key factor in not only finding items among the 800 million items but also the description of the product categories that would help them more. He said that it would come as the work progress and will not come at the same point in time. The company is heading towards the most crucial quarter of a year, i.e. holiday season quarter. That will be a further test to examine its credibility in sustaining the pace of growth without PayPal Holdings Inc (NASDAQ:PYPL).

Outlook Boosted

While some of the analysts were expecting eBay Inc (NASDAQ:EBAY) to struggle to maintain its earnings forecast, the company has boosted its adjusted earnings from continuing operations for the full year. As a result, it now expects to deliver $1.80 – $1.82 a share from $1.72 – $1.77 a share projected by it earlier. That was much better than the analysts’ expectations of $1.78 a share. During the conference call, its CFO, Scott Schenkel, attributed the increase in outlook to the results in the third quarter and the buyback of its shares besides a favorable tax rate.

EBay Inc (NASDAQ:EBAY) was able to add a net new active buyers of eight million in the third quarter compared to the year-ago quarter. That represented 5% growth, which was slower than the double-digit pace achieved a few years back. The online auctioneer worked hard to win back the customers confidence following a security breach compromising 145 million customers data in last year.

The online auctioneer reported earnings of 43 cents a share and net revenue of $2.1 billion for the third quarter. That came above the Street predictions. The company also indicated that it was not satisfied with the 5 – 6% growth rate and is poised for much better than that. In any case, the financial results removed some misconceptions about the online auctioneer.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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