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eBay (EBAY) Q4 Earnings Lag, Holiday Sales Drive Revenues

eBay Inc.EBAY fourth-quarter 2016 revenues were up sequentially and year over year. Shares jumped more than 8% in extended trading on Wednesday.

Over the last one year, the stock has underperformed the Zacks Internet - Commerce industry. It gained 22.82% compared with the industry's gain of 37.49%.

Earnings of 44 cents per share missed the Zacks Consensus Estimate of 47 cents per share. Adjusted earnings per share exclude one-time items but include stock-based compensation expense.

Revenues were $2.39 billion compared with the consensus mark of $2.40 billion. For the full year 2016, eBay's revenues were $8.98 billion, a 4.5% increase over revenues of $8.59 billion reported for full year 2015.

Revenue growth was driven by a strong holiday season and improvements in structured data, customer-to-customer (C2C) business and mobile platform. eBay added 2 million active buyers in the fourth quarter taking the total to 167 million.

In the quarter, eBay's customer-to-customer (C2C) business grew after nearly three years, driven by its efforts toward simplifying experience and tailoring price. The company also started integrating marketplace inventory into its Classified's platforms.

The company accelerated its efforts with structured data and artificial intelligence, increasing personalizing capacities and enhancing mobile experience. eBay's unique capabilities backed by technological improvements give it an edge over competitors such as Etsy ETSY , Alibaba BABA and Facebook FB .

Let's delve deeper in to the numbers

Revenues

Gross revenue of $2.39 billion was up 3.1% on a year-over-year basis (up 6% on an Fx-neutral basis). In the fourth quarter, the Marketplace platform contributed $21.1 billion of gross merchandise volume (GMV) and $1.9 billion of revenues. On the other hand, StubHub also showed signs of accelerated growth with contribution of $ 1.2 billion of GMV, up 5% on a year-over-year basis, and revenues of $0.28 billion, up 20% on a year- over-year basis.

Classifieds platforms also performed well with contribution of $0.2 billion of revenues, up 13% year-over-year on an FX-Neutral basis.

Gross Merchandise Volume grew 5% year over year on an Fx-neutral basis. Active buyers/customers totaled 167 million, up 3% from the year-ago quarter. For the full year, GMV grew 5% on an Fx-neutral basis.

eBay Inc. Revenue (TTM)

eBay Inc. Revenue (TTM) | eBay Inc. Quote

Margins and Income

Pro-forma gross margin for the quarter was 77.83%, down 115 basis points (bps) year over year and 2 bps sequentially.

Cost of revenues increased 9.3% on a year-over-year basis primarily due to the addition of PayPal processing costs and the impact of foreign exchange.

Adjusted operating expenses of $1.21 billion increased 8.7% from the prior-year quarter and 3.6% sequentially. Operating margin shrank 374 bps year over year but was up 218 bps sequentially to 27.3%.

Excluding the impact of intangibles amortization and other items on a tax-adjusted basis, pro-forma net income came in at $491 million compared with $720 million in the year-ago period.

Including the special items, GAAP net income was $5.95 billion ($5.3 per share) compared with $523 million (39 cents per share) in the year-ago quarter.

Balance Sheet and Cash Flow

eBay's balance sheet is highly leveraged, with total debt of $9 billion eclipsing the cash and short-term investments balance of $7.1 billion. The company generated $620 million in cash from continuing operations and spent $136 million on capex. Share repurchases totaled $841 million.

Outlook

For the first quarter of 2017, eBay expects revenues to grow 4%-6% on an Fx-neutral basis to $2.17 billion - $2.21 billion. The Zacks Consensus Estimate is pegged at $2.23 billion. Non-GAAP earnings are expected within 46 cents-48 cents. The Zacks Consensus Estimate is pegged at 44 cents. GAAP earnings per share from continuing operations are expected in a range of 25 cents - $40 cents.

In 2017, eBay expects revenues to grow 6%-8% on an Fx-neutral basis to $9.3 billion - $9.5 billion.

Zacks Rank

Currently, eBay is Zacks Rank #4 (Sell) stock.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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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.


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

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