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eBay's (EBAY) Q1 Earnings And Revenues Surpass Estimates

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eBay Inc. (EBAY - Free Report) reported first-quarter 2020 non-GAAP earnings of 77 cents, beating the Zacks Consensus Estimate by 4.1%. The bottom line also improved 19% year over year and 4.9% sequentially.

Net revenues of $2.4 billion also surpassed the Zacks Consensus Estimate of $2.3 billion. The top line was up 1% from the prior-year quarter on FX-neutral basis but down 1.6% on reported basis. Further, the figure declined 15.8% from the previous quarter.

Decline in the top line can be attributed to slowdown in gross merchandise volume (GMV). Further, sluggish Marketplace and Classifieds platforms were headwinds.

Nevertheless, the company witnessed solid momentum across its managed payments offerings, which processed more than $3 billion of GMV for over 32,000 sellers.

Further, eBay’s Promoted Listings delivered robust performance by generating revenues of $137 million in the first quarter, up 109% from the year-ago quarter, courtesy of growing momentum across sellers. Notably, above 310 million listings were promoted by 1.2 million sellers.

Additionally, the company witnessed growth of 2% in the active buyer number. The active buyer base came in at 174 million at the end of the first quarter.

In the first quarter, eBay completed the StubHub sale to viagogo for $4.1 billion in cash.

We note that coronavirus-induced market uncertainties remain overhangs.

Although coronavirus-induced shelter-in-place situation is benefiting the Marketplace platform, it is hurting the Classifieds platform.

Further, eBay has returned 8.8% in the year-to-date period, compared with the industry’s growth of 13.8%.

Nevertheless, stable cash flows, low capital intensity and disciplined capital management remain positives, which are likely to help eBay in combating the coronavirus-induced crisis.

Further, the company’s growing initiatives toward strengthening managed payments offerings remain major positives. Further, eBay remains optimistic regarding growth initiatives, which are based on enhancing seller experience by offering innovative seller tools and delivering better buyer experience by utilizing structured data.

All these strong endeavors are likely to help the stock rebound in the near term.



 

GMV Details

As a result of StubHub sale, the company’s total GMV of $21.3 billion in the first quarter was entirely generated by Marketplace platform. The figure surpassed the Zacks Consensus Estimate of $21.2 billion.

Further, it remained flat on FX neutral basis but down 1% year over year on a reported basis.

Marketplace GMV is categorised into two parts:

U.S. GMV totaled $7.6 billion, which accounted for 35.9% of the total GMV, down 4% from the year-ago quarter.

International GMV was $13.6 billion, which accounted for 64.1% of total GMV, remained flat year over year.

Revenues in Detail

eBay’s revenues are classified into two types:

Net Transaction: The company reported net transaction revenues of 1.9 billion, which was completely generated by the Marketplace platform in the first quarter. The figure accounted for 80% of the total net revenues and improved 1% year over year. Notably, Marketplace platform benefited shelter-in-place situation induced by the COVID-19 outbreak.

Marketing Services and Other: eBay generated $474 million of total marketing services and other revenues (20% of total revenues), which fell 10% from the year-ago quarter. This was due to sluggish performance of Marketplace that generated $230 million revenues, down 17% year over year. Further, Classifieds generated $248 million revenues, down 3% year over year on account of auto dealer closures in several markets as result of the coronavirus pandemic.

Operating Details

In the first quarter, eBay’s gross margin was 77.8%, expanding 20 basis points (bps) year over year.

Operating expenses of $1.2 billion contracted 180 bps as a percentage of net revenues from the year-ago quarter.

Non-GAAP operating margin was 31.5% in the first quarter, contracting 10 bps year over year.

eBay Inc. Price, Consensus and EPS Surprise

eBay Inc. Price, Consensus and EPS Surprise

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

Balance Sheet and Cash Flow

As of Mar 31, 2020, cash equivalents and short-term investments came in at $4.4 billion, up from $2.8 billion as on Dec 31, 2019.

Further, eBay’s balance sheet is highly leveraged, with a long-term debt of $7.7 billion at the end of the first quarter compared with $6.7 billion at the end of the fourth-quarter 2019.

The company generated $702 million of cash from operating activities during the reported quarter, down from $811 million in the last quarter.

The company’s free cash flow stood at $604 million during the reported quarter.

Further, the company repurchased $4 billion of shares and paid dividend of $114 million, returning a total of around $4.1 billion to shareholders in the first quarter.

Guidance

For second-quarter 2020, eBay expects revenues within $2.38-$2.48 billion, reflecting year-over-year growth of 2-6% on FX neutral basis. The Zacks Consensus Estimate for the same is pegged at $2.37 billion.

Non-GAAP earnings are expected within 73-80 cents and the Zacks Consensus Estimate for the same is pegged at 76 cents per share.

For 2020, the company expects revenues within the range of $9.56-$9.76 billion, indicating FX-neutral growth of 1-3%. The corresponding Zacks Consensus Estimate is pegged at $9.60 billion.

Adjusted earnings per share is expected to lie within the range of $3.00-$3.10. The Zacks Consensus Estimate for the metric is pegged at $3.05 per share.

Zacks Rank & Stocks to Consider

Currently, eBay carries a Zacks Rank #3 (Hold).

Netlist, Inc. (NLST - Free Report) , Pixelworks, Inc. (PXLW - Free Report) and InterDigital, Inc. (IDCC - Free Report) are some better-ranked stocks worth considering in the broader computer and technology sector, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for both Netlist and InterDigital is pegged at 15%, while the same for Pixelworks is 20%.

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