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eBay (EBAY) Gears Up for Q2 Earnings: What's in the Cards?

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eBay (EBAY - Free Report) is set to report second-quarter 2019 results on Jul 17.

The company beat the Zacks Consensus Estimate in all the trailing four quarters, delivering an average positive surprise of 8.91%.

In first-quarter 2019, adjusted earnings of 67 cents per share surpassed the Zacks Consensus Estimate by 4 cents. Gross revenues of $2.6 billion jumped 6% year over year (up 4% on an Fx-neutral basis) and outpaced the Zacks Consensus Estimate of $2.58 billion.

For the June-end quarter, eBay expects revenues to grow 2-4% on an Fx-neutral basis to $2.64-$2.69 billion. Non-GAAP earnings are projected within 61-63 cents per share.

The Zacks Consensus Estimate for second-quarter earnings and revenues is pegged at 63 cents and $2.68 billion, respectively. We anticipate eBay to perform well on the back of strength in its marketplace’s active users and net transaction revenues.

eBay Inc. Price and EPS Surprise

 

eBay Inc. Price and EPS Surprise

eBay Inc. price-eps-surprise | eBay Inc. Quote

Marketplace Active Buyers to Drive Growth

eBay’s accelerated Artificial Intelligence (AI) efforts through personalization, image search technology and customer support are expected to enhance the Marketplace platform.

The company has been providing more data to its marketplace sellers, including price and restocking guidance, as well as more insight into inventory such as demand signals for the right products, price, and timing.

Notably, eBay offers a local feature that allows a customer to buy something online and then pick it up at a local store when convenient. This reduces shipping costs and helps boost the Marketplace business.

Advertising & Payment Platform to Benefit eBay

eBay is progressing well with its payment and advertising business. The company plans to invest aggressively in this segment in the near term. Within the advertising segment, the company has witnessed robust growth in Promoting Listings.

Management projects its Advertising portfolio to contribute $1 billion to annual revenues over the next few years, which is a tailwind.

Core Platform Strength to Drive Net Transaction Revenues

In a bid to increase total net transaction revenues, eBay has been strengthening its core platform and improving user experience.

The company continues to accelerate its efforts by building product catalogs on structured data, enhancing mobile platform, rolling out browse-inspired shopping journeys, rejuvenating customer-to-customer (C2C) business and strengthening its brand.

The Zacks Consensus Estimate for net transaction revenues is currently pegged at $2.12 billion.

Overhangs

Heightening competition in the e-commerce market from companies like Amazon and Wal-Mart may affect its performance.

eBay's increased investment toward overall platform technology and slower growth rate compared to peers are overhangs. Moreover, its growth continues to suffer due to a lackluster global economy. The company is heavily dependent on countries outside the United States for transaction and Internet sales. This is also cited as a headwind as the United States is flourishing whereas emerging economies are slowing down.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

eBay currently carries a Zacks Rank #3 and an Earnings ESP of 0.00%, making surprise prediction difficult.

Stocks With Favorable Combinations

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat in their respective quarters to be reported:

Roper Technologies, Inc. (ROP - Free Report) has an Earnings ESP of +0.22% and flaunts a Zacks Rank #1, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

ASML Holding N.V. (ASML - Free Report) has an Earnings ESP of +1.84% and carries a Zacks Rank #3, currently.

Inphi Corporation (IPHI - Free Report) , another Zacks #3 Ranked stock, has an Earnings ESP of +1.21.

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