Online reseller eBay (EBAY) came out with its third quarter results after Wednesday’s closing bell, and the numbers did not disappoint.
The company reported a profit of $349.7 million, or 27 cents a share. Excluding charges related to stock-options and other items, the company said it would have earned $502 million, or 38 cents a share, for the recent period. The Street was expecting the bottom line number to come in at 37 cents per share. On the revenue front, eBay posted sales of $2.24 billion, well above the $2.14 billion analysts expected.
But it wasn’t all good news for eBay. The company’s all-important fourth quarter outlook—the one that includes the holiday shopping season—came in at the low end of expectations. For the coming quarter, the company sees adjusted earnings to range between 38 cents to 40 cents per share. The Street wanted to see a forecast of a solid 40 cents per share. The stock slid sharply in after-hours trading on the news.
It’s no surprise to me that sellers would bid the stock lower after today’s Q4 forecast. After all, when you have a stock go up as far and as fast as eBay has, you are bound to get some profit taking on less-than-stellar news. If we examine the chart here of eBay, we see that it really powered higher in July after its second quarter earnings release. Now I suspect the opposite will occur, as Wednesday’s fourth-quarter forecast will likely turn out the lights on the recent eBay party.
If you’re long eBay shares here, then it’s definitely time to take profits off the auction block. If you’re thinking about taking a position in eBay, I’d wait at least a few days before even thinking about it.
If the shares come down and stabilize right at their 50-day moving average (blue line), that would indeed be a bullish sign. If, however, shares fall below the 50-day, look out below. We could then see a downward plunge straight to the 200-day moving average (red line)—and you don’t want to be anywhere near that.
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