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Why Is eBay (EBAY) Up 6.1% Since Last Earnings Report?

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A month has gone by 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 the most recent earnings report in order to get a better handle on the important drivers.

eBay Surpasses Earnings and Revenue Estimates in Q1

eBay reported first-quarter 2021 non-GAAP earnings of $1.09 per share, beating the Zacks Consensus Estimate by 1.9%. The bottom line also improved 59% year over year and 26.7% sequentially.

Net revenues of $3.02 billion surpassed the Zacks Consensus Estimate of $2.97 billion. Further, the figure increased 42% from the year-ago quarter on a reported basis and 38% on a FX-neutral basis. Also, the figure rose 5.4% 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.

Additionally, the growing adoption of its managed payments remained a major positive. The number of sellers migrated to managed payments exceeded 4 million in the reported quarter, out of which more than 80% was done in the United States. Notably, managed payment offering processed 52% of on-platform volumes globally in the first quarter.

Further, eBay’s Promoted Listings delivered robust performance by generating revenues of $224 million, which grew 64% on a reported basis and 58% on a FX-neutral basis from the prior-year quarter.

Additionally, the company witnessed year-over-year growth of 7% in the active buyer base, which stood at 187 million at the end of the first quarter. Notably, strong momentum across new and reactivated customers was a tailwind.

The company’s 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.

GMV Details

The company’s total GMV of $27.5 billion in the reported quarter exhibited year-over-year growth of 29% and 24% on a reported and a FX-neutral basis, respectively. Further, the figure surpassed the Zacks Consensus Estimate of $26.2 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 $10.4 billion, which accounted for 37.8% of total GMV, up 36% from the year-ago quarter.

International GMV was $17.1 billion, which accounted for 62.2% of total GMV. It grew 25% 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 $2.7 billion in the quarter under review, accounting for 90.4% of the total revenues. Further, the figure was up 44% from the year-ago quarter. Notably, net transaction revenues are completely generated by the Marketplace platform.

Marketing Services and Other: eBay generated $291 million of total marketing services and other revenues (9.6% of total revenues), which was up 27% from the year-ago quarter.

Operating Details

In the first quarter, eBay’s gross margin was 72.8%, contracting 360basis points (bps) year over year.

Operating expenses of $1.4 billion contracted 500 bps as a percentage of net revenues from the year-ago quarter.

Non-GAAP operating margin was 33% in the first quarter, expanding 140 bps year over year.

Balance Sheet & Cash Flow

As of Mar 31, 2021, cash equivalents and short-term investments were $3.4 billion, down from $3.8 billion as of Dec 31, 2020.

Further, long-term debt was $5.9 billion at the end of the reported quarter compared with $7.7 billion at the end of the last reported quarter.

The company generated $1.04 billion of cash from operating activities in the first quarter, up from $758 million in the previous quarter.

Its free cash flow stood at $855million in the reported quarter.

Further, the company repurchased $292 million worth of shares and paid out dividends of $122 million in the reported quarter.

Guidance

For second-quarter 2021, eBay expects net revenues of $2.98-$3.03 billion. On a FX-neutral basis, year-over-year growth in revenues is anticipated to be 8-10%.

Non-GAAP earnings are anticipated to be 91-96 cents per share.

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 -7.26% due to these changes.

VGM Scores

Currently, eBay has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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