EBay Inc (EBAY) Beats Earnings, But Investors Weren’t Pleased

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EBAY - EBay Inc (EBAY) Beats Earnings, But Investors Weren’t Pleased

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eBay Inc (NASDAQ:EBAY) was showing a lot of momentum lately, with the stock gaining a sizzling 43% since late June. But it looks like Wall Street may have been overly enthused. On the heels of the latest quarterly report, eBay stock is off nearly 6% in after-hours trading.

eBay ebay stock paypalNow the company actually was able to beat on both the top and bottom lines. During Q3, revenues rose by 5.6% to $2.22 billion and the adjusted earnings came to 45 cents a share. The Street, on the other hand, was forecasting earnings of 44 cents and revenues of $2.2 billion.

But when it comes to eBay stock, the main concern is always the fourth quarter. And unfortunately, it looks like there may be a lackluster holiday season.

EBAY expects earnings of 52 cents to 54 cents a share on revenues of $2.36 billion to $2.41 billion in revenues. But the consensus was earnings of 54 cents a share and revenues of $2.4 billion. Not too inspiring, right?

What’s more, in the eBay earnings report, there were also these highlights:

  • The company acquired Corrigon, a top operator in visual search technologies.
  • EBAY sold its remaining stake in Mercadolibre Inc (NASDAQ:MELI).
  • EBAY added more than one million active buyers, for a total of 165 million.
  • The Marketplace platforms generated $19 billion in GMV and $1.8 billion in revenues.

As for the expected weakness in the Q4, the main reason is likely to be the intense competitive environment. Of course, Amazon.com, Inc. (NASDAQ:AMZN) continues to grow at a rapid clip and has inherent advantages, such as its Prime system, logistics and add-on services like video/music streaming and AWS.

But EBAY could also feel the impact of Facebook Inc (NASDAQ:FB), which recently launched its own listing service — which is free for users. Oh, and even traditional brick-and-mortar operators like Target Corporation (NYSE:TGT) and Wal-Mart Stores, Inc. (NYSE:WMT) are ramping up their e-commerce efforts.

Now EBAY certainly recognizes all this and has been taking actions. To this end, the company is remaking its site by adding personalization, better search systems, machine learning and even virtual reality. But EBAY is also trying to bolster its brand, such as with its advertising campaign with supermodel Karlie Kloss. A key part of this strategy is to go beyond the perception of the company being about auctions — and instead showcasing its rich diversity of products.

It also helps that the company continues to crank out hefty cash flows, which will allow for the aggressive R&D spending and acquisitions. In the quarter, EBAY generated a hefty $802 million in operating cash flows. In all, there is about $10.4 billion in the bank.

But the initiatives to transform the company take time to get traction. So in the meantime, it could be tough for EBAY stock, especially if there will probably not be much excitement for the holidays.

Tom Taulli runs the InvestorPlace blog IPO Playbook and also OptionExercise.com, which provides interactive tools and financial services for those who have employee stock options (pre- and post-IPO). Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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Tom Taulli is the author of various books. They include Artificial Intelligence Basics and the Robotic Process Automation Handbook. His upcoming book is called Generative AI: How ChatGPT and other AI Tools Will Revolutionize Business.


Article printed from InvestorPlace Media, https://investorplace.com/2016/10/ebay-inc-stock-earnings/.

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