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What's in Store for eBay Inc. (EBAY) This Earnings Season?

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eBay Inc. (EBAY - Free Report) , one of the world's largest online trading communities, is expected to beat expectations when it reports third-quarter 2016 results on Oct 19.

Why a Likely Positive Surprise?

Our proven model shows that eBay is likely to beat estimates this quarter. A stock needs to have both a positive Earnings ESP  and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. eBay has the right combination of the two key components.

Zacks ESP: eBay currently has an Earnings ESP of +2.78%. This is because the Most Accurate estimate stands at 37 cents, while the Zacks Consensus Estimate is pegged lower at 36 cents.

Zacks Rank: eBay carries a Zacks Rank #3, which when combined with an ESP of +2.78% make us reasonably confident of a positive surprise.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

EBAY INC Price and EPS Surprise

What is Driving the Better-Than-Expected Results?

eBay has taken several initiatives including the collection of data from sellers, application of artificial intelligence for a better user experience, increased use of social media to drive traffic, and focus on discovery-based user experience to name a few.

eBay continues to revamp seller policies to help small- and medium-sized sellers and better reward those who provide quality service to buyers. The company is also allowing sellers to tailor the way they manage returns based on their specific business needs with as much involvement from eBay as they desire.

eBay has become active on the acquisition front. In the second quarter, the company acquired Expertmaker.  It plans to acquire SalesPredict in order to strengthen its presence in artificial intelligence, machine learning and structured data. The company also announced the acquisition of Ticketbis to expand StubHub beyond North America to Europe, Asia Pacific and Latin America.

For the third quarter of 2016, eBay expects revenues to grow 6%–7% on an Fx-neutral basis to $2.16 billion – $2.19 billion. Non-GAAP earnings are expected within 42 cents–44 cents. GAAP earnings per share from continuing operations are expected in the range of 35 cents–37 cents.

Other Stocks to Consider

Here are some stocks, which you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

NVIDIA Corporation (NVDA - Free Report) , with an Earnings ESP of +8.93% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Barracuda Networks, Inc. with an Earnings ESP of +25.00% and Zacks Rank #1.

Veeco Instruments Inc. (VECO - Free Report) with an Earnings ESP of +17.86% and Zacks Rank #1.

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