eBay (EBAY) Earnings And Revenues Surpass Estimates in Q2
eBay Inc. EBAY reported second-quarter 2020 non-GAAP earnings of $1.08 per share, beating the Zacks Consensus Estimate by 2.8%. The bottom line also improved 63.6% year over year and 40.2% sequentially.
Net revenues of $2.9 billion surpassed the Zacks Consensus Estimate of $2.8 billion. The top line was up 18% and 21% from the prior-year quarter on reported and FX-neutral basis, respectively. Further, the figure surged20.7% from the priorquarter.
Solid performance of Marketplace platform across all the major end-markets drove the top line. Further, accelerating gross merchandise volume (GMV) of the company contributed significantly to the performance.
Further, solid momentum across its managed payments offerings, which has processed $4.7 billion of GMV for around42,000 sellers since its launch till date, was a major positive.
Further, eBay’s Promoted Listings delivered robust performance by generating revenues of $196 million in the second quarter, up 120% from the year-ago quarter. This can be attributed to growing momentum across sellers.
Additionally, the company witnessed year-over-year growth of 5% in the active buyer number.The active buyer base totaled182 million at the end of the second quarter.
Further, strong momentum across new customers was a tailwind. During the reported quarter, the company added 8 million new customers to its platform.
Coming to the price performance, eBay has returned 51.1% in the year-to-date period, compared with the industry’s growth of 45.7%.
Stable cash flows, low capital intensity and disciplined capital management remain key catalysts. Further, strength across Marketplace platform courtesy of expanding buyer base and increasing traffic is a positive.
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.
Owing to shelter-in-place protocol on account of coronavirus, the company is witnessing solid growth in e-commerce space, which has been benefiting from its Marketplace business. This is likely to act as a tailwind in the third quarter as well.
In July, eBay signed a definitive agreement to sell its Classifieds business to Adevinta. This move is likely to aid company’s focus toward strengthening its Marketplace business further.
The company’s total GMV of $27.1 billion in the second quarter exhibited year-over-year growth of 26% and 29% on reported and FX-neutral basis, respectively. Further, the figure surpassed the Zacks Consensus Estimate of $26.7 billion.
Notably, eBay’s GMV is entirely generated by Marketplace platform after the sale of StubHub. Marketplace GMV is categorised into two parts:
U.S. GMV totaled $10.5 billion, which accounted for 38.7% of total GMV, up 35% from the year-ago quarter.
International GMV was $16.6 billion, which accounted for 61.3% of total GMV, grew 22% on a year-over-year basis.
Revenues in Detail
eBay’s revenues are classified into two types:
Net Transaction: The company reported net transaction revenues of $2.4 billion in the reported quarter, accounting for 85.4% of the total revenues. Further, the figure was up 30% from the year-ago quarter. Notably, net transaction revenues are completely generated by the Marketplace platform whose strong performance in the second quarter drove year-over-year growth.
Marketing Services and Other: eBay generated $418 million of total marketing services and other revenues (14.6% of total revenues), which fell 22% from the year-ago quarter.This was due to sluggish performance of Marketplace that generated $221 million of these revenues, down 18% year over year.Further, Classifieds comprised $201 million revenues, down 26% year over year.
eBay Inc. Price, Consensus and EPS Surprise
In the second quarter, eBay’s gross margin was 79.1%, expanding 190 basis points (bps) year over year.
Operating expenses of $1.4billion contracted 360 bps as a percentage of net revenues from the year-ago quarter.
Non-GAAP operating margin was 34.3% in the second quarter, expanding510 bps year over year.
Balance Sheet and Cash Flow
As of Jun 30, 2020, cash equivalents and short-term investments came in at $5.3 billion, up from $4.4billion as on Mar 31, 2020.
Further, eBay’s balance sheet is highly leveraged with a long-term debt of $8.2 billion at the end of the reported quarter compared with $7.7 billion at the end of the last reported quarter.
The company generated $964 million of cash from operating activities during the second quarter, down from $702 million in the previous quarter.
The company’s free cash flow stood at$866million during the reported quarter.
Further, the company repurchased $3 billion of shares and paid dividend of $112 million in the second quarter.
For third-quarter 2020, eBay expects net revenues within the range of $2.64-$2.71 billion. The Zacks Consensus Estimate for the same is pegged at $2.51 billion.
Non-GAAP earnings are anticipated in the range of81-87 cents.Notably, the Zacks Consensus Estimate for the same is pegged at 80cents per share.
For 2020, the companyhas raised guidance for net revenues from the range of $9.56-$9.76 billion to the band of $10.56-$10.75 billion.The corresponding Zacks Consensus Estimate is pegged at $10.34 billion.
The guidance for non-GAAP earnings per sharehas also been revised upward from$3.00-$3.10 to $3.47-$3.59. The Zacks Consensus Estimate for the metric stands at $3.49 per share.
Zacks Rank & Other Stocks to Consider
Currently, eBay sports a Zacks Rank #1 (Strong Buy).
JD.com, Inc. JD, The Kroger Co. KR and AutoNation, Inc. AN are some other top-ranked stocks worth considering in the broader Retail-Wholesale sector, each flaunting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for both JD.com, Kroger and AutoNation is pegged at 46.79%, 5.5% and 4.71%, respectively.
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