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eBay's (EBAY) Q1 Earnings Match Estimates, Revenues Miss
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eBay Inc.’s (EBAY - Free Report) first-quarter 2018 earnings matched the Zacks Consensus Estimate, while revenues missed the same by a slight margin. Pro-forma earnings of 53 cents improved 9% year over year.
Gross revenues of $2.58 billion were up 12% on a year-over-year basis (up 7% on an Fx-neutral basis) and within the guided range of $2.57-$2.61 billion. Revenues were below the Zacks Consensus Estimate of $2.598 billion.
Shares have lost 4.3% in after-hours trading in response to the company’s weaker-than-expected revenues. Also, in the past 12 months, the stock has gained 19.1%, underperforming its industry’s growth of 42.4%.
On the call, management sounded impressed with the progress of the company’s transformation and positive response of customers to it. eBay is leveraging on its structured data and Artificial Intelligence (AI) strength to build product catalogs, enhance mobile platform, roll out new browse-inspired shopping journeys, boost customer-to-customer (C2C) business and strengthen its brand.
It accelerated its AI efforts through structured data, personalization, image search technology and customer support initiatives in several areas.
During the quarter, eBay announced that it will acquire Giosis' Japan business, including the Qoo10.jp platform. The deal, expected to close in the second quarter of 2018, will likely expand eBay's footprint in Japan.
Overall, we remain positive about eBay’s replatforming and brand enhancement initiatives. Its unique capabilities backed by technological improvements give it an edge over competitors such as Etsy (ETSY - Free Report) , Alibaba (BABA - Free Report) and Facebook .
Revenues and GMV
In the first quarter, the Marketplace platform contributed $22.5 billion of gross merchandise volume (GMV) and $2.1 billion of revenues. Marketplace GMV grew 13% year over year on a reported basis and 7% on an FX-Neutral basis. The increase was aided by continued expansion of new user experiences.
StubHub contributed $1 billion of GMV, up 14% on a year-over-year basis, and revenues of $232 million, up 9% from the prior-year quarter. The increase was driven by robust sports landscape, including a record Super Bowl and strong international growth.
Classifieds platforms also performed well with the contribution of $246 million of revenues, up 24% on a year-over-year and 10% on an FX-Neutral basis, driven primarily by strength in Germany.
Total GMV of $23.6 million in the first quarter grew 13% year over year.
During the quarter, global active buyers/customers increased 4% from the year-ago quarter to 171 million.
Margins and Income
Pro-forma gross margin in the quarter was 78.3%, up 60 basis points (bps) year over year.
Adjusted operating expenses of $1.36 billion increased 16.1% from the prior-year quarter. Pro-forma operating margin was 27.9%, down 100 bps year over year. The decrease was due to increased investments in sales, and marketing and product development.
GAAP net income was $5.4 billion compared with $5.6 million in the year-ago quarter.
Balance Sheet and Cash Flow
eBay’s balance sheet is highly leveraged, with long-term debt of $9.2 billion. Cash and short-term investments balance were $4.8 billion at the end of the first quarter versus $5.9 billion in the prior quarter.
eBay generated $495 million in cash from operating activities and spent $158 million on capex. Free cash flow during the quarter was $337 million and the company repurchased shares worth $1 billion.
Outlook
For the second quarter of 2018, eBay expects revenues to grow 6-8% on an Fx-neutral basis to $2.64-$2.68 billion, better than the Zacks Consensus Estimate of $2.68 billion. Non-GAAP earnings are expected within 50-52 cents and the Zacks Consensus Estimate is pegged at 52 cents. GAAP earnings per share from continuing operations are expected in the range of 33-37 cents.
eBay maintained its full-year guidance. The company expects full-year revenues between $10.9 billion and $11.1 billion. The Zacks Consensus Estimate is pegged at $11.02. Adjusted earnings per share are expected between $2.25 and $2.30. The Zacks Consensus Estimate is pegged at $2.29.
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eBay's (EBAY) Q1 Earnings Match Estimates, Revenues Miss
eBay Inc.’s (EBAY - Free Report) first-quarter 2018 earnings matched the Zacks Consensus Estimate, while revenues missed the same by a slight margin. Pro-forma earnings of 53 cents improved 9% year over year.
Gross revenues of $2.58 billion were up 12% on a year-over-year basis (up 7% on an Fx-neutral basis) and within the guided range of $2.57-$2.61 billion. Revenues were below the Zacks Consensus Estimate of $2.598 billion.
Shares have lost 4.3% in after-hours trading in response to the company’s weaker-than-expected revenues. Also, in the past 12 months, the stock has gained 19.1%, underperforming its industry’s growth of 42.4%.
On the call, management sounded impressed with the progress of the company’s transformation and positive response of customers to it. eBay is leveraging on its structured data and Artificial Intelligence (AI) strength to build product catalogs, enhance mobile platform, roll out new browse-inspired shopping journeys, boost customer-to-customer (C2C) business and strengthen its brand.
It accelerated its AI efforts through structured data, personalization, image search technology and customer support initiatives in several areas.
During the quarter, eBay announced that it will acquire Giosis' Japan business, including the Qoo10.jp platform. The deal, expected to close in the second quarter of 2018, will likely expand eBay's footprint in Japan.
Overall, we remain positive about eBay’s replatforming and brand enhancement initiatives. Its unique capabilities backed by technological improvements give it an edge over competitors such as Etsy (ETSY - Free Report) , Alibaba (BABA - Free Report) and Facebook .
Revenues and GMV
In the first quarter, the Marketplace platform contributed $22.5 billion of gross merchandise volume (GMV) and $2.1 billion of revenues. Marketplace GMV grew 13% year over year on a reported basis and 7% on an FX-Neutral basis. The increase was aided by continued expansion of new user experiences.
StubHub contributed $1 billion of GMV, up 14% on a year-over-year basis, and revenues of $232 million, up 9% from the prior-year quarter. The increase was driven by robust sports landscape, including a record Super Bowl and strong international growth.
Classifieds platforms also performed well with the contribution of $246 million of revenues, up 24% on a year-over-year and 10% on an FX-Neutral basis, driven primarily by strength in Germany.
Total GMV of $23.6 million in the first quarter grew 13% year over year.
During the quarter, global active buyers/customers increased 4% from the year-ago quarter to 171 million.
Margins and Income
Pro-forma gross margin in the quarter was 78.3%, up 60 basis points (bps) year over year.
Adjusted operating expenses of $1.36 billion increased 16.1% from the prior-year quarter. Pro-forma operating margin was 27.9%, down 100 bps year over year. The decrease was due to increased investments in sales, and marketing and product development.
GAAP net income was $5.4 billion compared with $5.6 million in the year-ago quarter.
Balance Sheet and Cash Flow
eBay’s balance sheet is highly leveraged, with long-term debt of $9.2 billion. Cash and short-term investments balance were $4.8 billion at the end of the first quarter versus $5.9 billion in the prior quarter.
eBay generated $495 million in cash from operating activities and spent $158 million on capex. Free cash flow during the quarter was $337 million and the company repurchased shares worth $1 billion.
Outlook
For the second quarter of 2018, eBay expects revenues to grow 6-8% on an Fx-neutral basis to $2.64-$2.68 billion, better than the Zacks Consensus Estimate of $2.68 billion. Non-GAAP earnings are expected within 50-52 cents and the Zacks Consensus Estimate is pegged at 52 cents. GAAP earnings per share from continuing operations are expected in the range of 33-37 cents.
eBay maintained its full-year guidance. The company expects full-year revenues between $10.9 billion and $11.1 billion. The Zacks Consensus Estimate is pegged at $11.02. Adjusted earnings per share are expected between $2.25 and $2.30. The Zacks Consensus Estimate is pegged at $2.29.
eBay Inc. Price, Consensus and EPS Surprise
eBay Inc. Price, Consensus and EPS Surprise | eBay Inc. Quote
Zacks Rank
Currently, eBay carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>