Unheralded eBay Inc (EBAY) Stock Looks to Add to Big 2017

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Ebay Inc (NASDAQ:EBAY) was one of the choppier selections in the markets last year. Between beak and trough, prices last year measured more than 50%. The annual return on EBAY stock, however, came to a Street-beating but still quiet 9.5%.

Unheralded eBay Inc (EBAY) Stock Looks to Add to Big 2017

So far, things are much better in 2017.

EBAY stock has run up almost 25% for the year-to-date, and it’s heading into Thursday evening’s second-quarter earnings report building up quite the head of steam. Shares now trade near their highest point since spinning off PayPal Holdings Inc (NASDAQ:PYPL) back in 2015.

Ebay is on pace to beat its outstanding annual average return since 1999 (21%) — all it has to do is not choke on its way to the finish line. That said, recent developments indicate that the stock will continue to remain on the right side of momentum.

Shopify Developments

Last week, cloud-based merchant solutions provider Shopify Inc (US) (NYSE:SHOP) announced that it will add eBay as a sales channel. Expected to go live later this fall, the partnership will allow Shopify to tap into eBay’s 169 million active shoppers. In return, eBay has another avenue to build its revenue stream. According to Shopify, 60% of their merchant clients sell in two or more different channels.

Most importantly, the markets have responded enthusiastically. EBAY stock climbed about 3% in the two following trading days, sending the e-commerce company to all-time highs.

That’s the kind of momentum you want heading into earnings. The question is whether management can make the most of it.

Positive Trends Ahead of eBay Q2 Earnings

Ebay is scheduled to release second-quarter fiscal 2017 earnings on Thursday after the bell. Analysts estimates are for 45 cents per share, with a tight range between 42 and 46 cents.

Generally speaking, Wall Street should be confident in another eBay earnings beat. The company has put up seven consecutive quarters of at least meeting (if not beating) analyst expectations.

EBAY stock chart

On the revenue side of the equation, analysts are expecting the company to ring up $2.3 billion. Sales targets haven’t been a problem in recent quarters, and I don’t expect negative surprises in this department. EBAY stock has one of the highest three-year revenue growth rates within the specialty retail sector.

Additionally, eBay’s year-over-year sales growth in the past four quarters averages 4.5%. To hit the $2.3 billion top-line target, the company needs to achieve a mere 3.1% year-over-year improvement.

On paper, the upcoming eBay earnings report seems to be a fairly mundane affair, especially in light of the flashier Shopify news. But there’s always the issue of guidance — the potential land mine of quarterly reports. For instance, in Q1, the e-commerce company topped earnings estimates, but its Q2 and full-year forecasts failed to impress, sending EBAY stock significantly lower.

In fact, investors needed to wait about a month before shares resumed their northward trajectory.

Bottom Line on EBAY Stock

Management already got the disappointing Q2 guidance out of the way, so eBay will walk into this report with strong momentum, as well as low expectations for quarterly results — a decent combination that could help shares maintain their trajectory.

Longer-term, though, EBAY stock holders can take encouragement knowing that they’re on the winning side of the e-commerce/retail trade. Regardless of where you look, brick-and-mortar establishments are falling like flies. People are fundamentally changing the way they do retail, and while eBay isn’t Amazon.com, Inc. (NASDAQ:AMZN), it still has an excellent brand and plenty of organic growth firepower of its own.

Thus, even if Thursday sees eBay lay an egg, short-term volatility and fear will give way to the more optimistic big picture.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.


Article printed from InvestorPlace Media, https://investorplace.com/2017/07/unheralded-ebay-inc-ebay-stock-looks-to-add-to-big-2017/.

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