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eBay (EBAY) Down 5.3% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for eBay (EBAY - Free Report) . Shares have lost about 5.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is eBay due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
eBay Surpasses Earnings and Revenue Estimates in Q3
eBay reported third-quarter 2020 non-GAAP earnings of 85 cents per share, beating the Zacks Consensus Estimate by 11.8%. The bottom line also improved 64% year over year but declined 21.3% sequentially.
Net revenues of $2.61 billion surpassed the Zacks Consensus Estimate by 5%. Further, the figure increased 25% from the year-ago quarter on both reported and FX-neutral basis. However, the figure decreased 9% sequentially.
Year-over-year growth in the top line was primarily driven by solid momentum across the Marketplace platform. Further, accelerating gross merchandise volume (GMV) of the company contributed significantly to the performance.
Further, the growing adoption of the company’s managed payments remained a major positive. The number of sellers migrated to managed payments reached 340,000 in the reported quarter. Further, managed payments offering, which has processed 20% of on-platform volumes,was a major positive.
Further, eBay’s Promoted Listings delivered robust performance by generating revenues of $186 million in the third quarter, which grew 79% on a reported basis and 77% on a FX-neutral basis from the prior-year quarter. This can be attributed to the growing momentum across sellers on the back of data-driven recommendations, which are aiding ad conversions.
Additionally, the company witnessed year-over-year growth of 5% in the active buyer base, which stood at 183 million at the end of the third quarter. Notably, strong momentum across new and reactivated customers was a tailwind.
However, sluggishness in marketing services remained a concern.
Nevertheless, the company’s growing initiatives toward strengthening managed payment offerings remain major positives. Further, eBay remains optimistic regarding growth initiatives, which are based on enhancing the seller experience by offering innovative seller tools and delivering a better buyer experience by utilizing structured data.
Also, e-commerce boom, owing to shelter-in-place protocol on account ofthe coronavirus outbreak, busy holiday shopping season and positive impacts of government stimulus programs are likely to act as tailwinds in the fourth quarter.
Additionally, strength across the Marketplace platform, courtesy of expanding buyer base and increasing traffic, is a positive.
Further, eBay, which entered a definitive agreement to sell Classifieds to Adevinta, has now declared the business as discontinued operations and is progressing well to complete the ongoing transfer by first-quarter 2021.This is likely to aid the company’s focus toward strengthening its Marketplace business further.
GMV Details
The company’s total GMV of $25.05 billion in the third quarter exhibited year-over-year growth of 22% and 21% on reported and FX-neutral basis, respectively. Further, the figure surpassed the Zacks Consensus Estimate of $24.61 billion.
Notably, eBay’s GMV is entirely generated by the Marketplace platform after the sale of StubHub. Marketplace GMV is categorized into two parts:
U.S. GMV totaled $9.8 billion, which accounted for 39.1% of total GMV, up 33% from the year-ago quarter.
International GMV was $15.3 billion, which accounted for 60.9% of total GMV, grew 16% 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 $2.36 billion in the reported quarter, accounting for 90.4% of the total revenues. Further, the figure was up 29% from the year-ago quarter. Notably, net transaction revenues are completely generated by the Marketplace platform. Strength across payments and advertising was a positive.
Marketing Services and Other: eBay generated $251 million of total marketing services and other revenues (9.6% of total revenues), which was down 1% from the year-ago quarter.
Operating Details
In the third quarter, eBay’s gross margin was 74.8%, expanding 20 basis points (bps) year over year.
Operating expenses of $1.3 billion contracted 610 bps as a percentage of net revenues from the year-ago quarter.
Non-GAAP operating margin was 30.7% in the third quarter, expanding 400 bps year over year.
Balance Sheet & Cash Flow
As of Sep 30, 2020, cash equivalents and short-term investments were $3.7 billion, down from $5.3 billion as of Jun 30, 2020.
Further, eBay’s balance sheet is highly leveraged with long-term debt of $7.7 billion at the end of the reported quarter compared with $8.2 billion at the end of the last reported quarter.
The company generated $105 million of cash from operating activities during the third quarter, significantly down from $964 million in the previous quarter. This was due to $611 million of cash used in discontinued operating activities, which was absent in the second quarter.
The company’s free cash flow stood at$584million during the reported quarter.
Further, it repurchased $700 million worth of 18 million shares and paid dividends of $111 million in the third quarter.
Guidance
For fourth-quarter 2020, eBay expects net revenues of $2.64-$2.71 billion.
Non-GAAP earnings are anticipated to be 78-84 cents.
For 2020, the company raised guidance for net revenues from $9.59-$9.78 billion (previously mentioned range, excluding the impact of Classifieds) to $10.04-$10.11 billion.
The guidance for non-GAAP earnings per share has also been revised upward from $3.04-$3.16 (excluding Classifieds impacts) to $3.34-$3.40.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted 5.67% 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. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise eBay has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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eBay (EBAY) Down 5.3% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for eBay (EBAY - Free Report) . Shares have lost about 5.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is eBay due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
eBay Surpasses Earnings and Revenue Estimates in Q3
eBay reported third-quarter 2020 non-GAAP earnings of 85 cents per share, beating the Zacks Consensus Estimate by 11.8%. The bottom line also improved 64% year over year but declined 21.3% sequentially.
Net revenues of $2.61 billion surpassed the Zacks Consensus Estimate by 5%. Further, the figure increased 25% from the year-ago quarter on both reported and FX-neutral basis. However, the figure decreased 9% sequentially.
Year-over-year growth in the top line was primarily driven by solid momentum across the Marketplace platform. Further, accelerating gross merchandise volume (GMV) of the company contributed significantly to the performance.
Further, the growing adoption of the company’s managed payments remained a major positive. The number of sellers migrated to managed payments reached 340,000 in the reported quarter. Further, managed payments offering, which has processed 20% of on-platform volumes,was a major positive.
Further, eBay’s Promoted Listings delivered robust performance by generating revenues of $186 million in the third quarter, which grew 79% on a reported basis and 77% on a FX-neutral basis from the prior-year quarter. This can be attributed to the growing momentum across sellers on the back of data-driven recommendations, which are aiding ad conversions.
Additionally, the company witnessed year-over-year growth of 5% in the active buyer base, which stood at 183 million at the end of the third quarter. Notably, strong momentum across new and reactivated customers was a tailwind.
However, sluggishness in marketing services remained a concern.
Nevertheless, the company’s growing initiatives toward strengthening managed payment offerings remain major positives. Further, eBay remains optimistic regarding growth initiatives, which are based on enhancing the seller experience by offering innovative seller tools and delivering a better buyer experience by utilizing structured data.
Also, e-commerce boom, owing to shelter-in-place protocol on account ofthe coronavirus outbreak, busy holiday shopping season and positive impacts of government stimulus programs are likely to act as tailwinds in the fourth quarter.
Additionally, strength across the Marketplace platform, courtesy of expanding buyer base and increasing traffic, is a positive.
Further, eBay, which entered a definitive agreement to sell Classifieds to Adevinta, has now declared the business as discontinued operations and is progressing well to complete the ongoing transfer by first-quarter 2021.This is likely to aid the company’s focus toward strengthening its Marketplace business further.
GMV Details
The company’s total GMV of $25.05 billion in the third quarter exhibited year-over-year growth of 22% and 21% on reported and FX-neutral basis, respectively. Further, the figure surpassed the Zacks Consensus Estimate of $24.61 billion.
Notably, eBay’s GMV is entirely generated by the Marketplace platform after the sale of StubHub. Marketplace GMV is categorized into two parts:
U.S. GMV totaled $9.8 billion, which accounted for 39.1% of total GMV, up 33% from the year-ago quarter.
International GMV was $15.3 billion, which accounted for 60.9% of total GMV, grew 16% 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 $2.36 billion in the reported quarter, accounting for 90.4% of the total revenues. Further, the figure was up 29% from the year-ago quarter. Notably, net transaction revenues are completely generated by the Marketplace platform. Strength across payments and advertising was a positive.
Marketing Services and Other: eBay generated $251 million of total marketing services and other revenues (9.6% of total revenues), which was down 1% from the year-ago quarter.
Operating Details
In the third quarter, eBay’s gross margin was 74.8%, expanding 20 basis points (bps) year over year.
Operating expenses of $1.3 billion contracted 610 bps as a percentage of net revenues from the year-ago quarter.
Non-GAAP operating margin was 30.7% in the third quarter, expanding 400 bps year over year.
Balance Sheet & Cash Flow
As of Sep 30, 2020, cash equivalents and short-term investments were $3.7 billion, down from $5.3 billion as of Jun 30, 2020.
Further, eBay’s balance sheet is highly leveraged with long-term debt of $7.7 billion at the end of the reported quarter compared with $8.2 billion at the end of the last reported quarter.
The company generated $105 million of cash from operating activities during the third quarter, significantly down from $964 million in the previous quarter. This was due to $611 million of cash used in discontinued operating activities, which was absent in the second quarter.
The company’s free cash flow stood at$584million during the reported quarter.
Further, it repurchased $700 million worth of 18 million shares and paid dividends of $111 million in the third quarter.
Guidance
For fourth-quarter 2020, eBay expects net revenues of $2.64-$2.71 billion.
Non-GAAP earnings are anticipated to be 78-84 cents.
For 2020, the company raised guidance for net revenues from $9.59-$9.78 billion (previously mentioned range, excluding the impact of Classifieds) to $10.04-$10.11 billion.
The guidance for non-GAAP earnings per share has also been revised upward from $3.04-$3.16 (excluding Classifieds impacts) to $3.34-$3.40.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted 5.67% 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. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise eBay has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.