eBay Delivers Better Than Expected Q1 Results, Guidance Disappoints

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eBay ( EBAY ) released better than expected Q1 2017 results, but its slightly subdued Q2 guidance offset much of that positive sentiment. The company's revenue grew 4% year-over-year (y-o-y) to $2.2 billion during the first quarter, driven by consistent single digit growth in both the marketplace and advertising businesses. The company's adjusted net income jumped 4% y-o-y to $0.49 per share, just beating analyst consensus estimates of $0.48. It is important to note that eBay's growth lags far behind Amazon as well as the industry average, and therefore the company is consistently losing market share in the U.S. and globally every quarter.


Increased Marketing and Launch of New Programs

Top line growth was driven by a 15% increase in StubHub sales and a 6% increase in Marketing & Advertising revenue over the prior year quarter. This was the fifth consecutive quarter of sales growth for eBay and was driven by:  1) structuring data into catalogs (for search engine optimization); 2) diversifying traffic sources; 3) enhancing the seller experience; and, 4) increases in marketing. The increased marketing and product development costs led to a 10.5% increase in operating expenses in the quarter, which led to an 11% decline in operating income to $546 million. Another cause for concern was the 7.5% y-o-y decline in free cash flows due to declining cash flows from operations.

The company is looking to improve its market perception and position this year, and is scheduled to launch two new programs over the next few months: 1) new authentication program for high-end goods; and, 2) guaranteed 3-day delivery program for about 20 million products on its website.

Q2 2017 and Full Year 2017 Guidance

In the second quarter this year, eBay expects revenue between $2.28 billion and $2.32 billion. It also expects non-GAAP EPS of $0.43 to $0.45 per share, against consensus estimates of $0.47. ebay-34 Have more questions about Ebay? Please refer to our complete analysis for Ebay

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Stocks , US Markets , Investing Ideas
Referenced Symbols: EBAY , AMZN , WMT , GRPN

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