Markets

eBay Weighs Divesting StubHub and Classifieds After Another Strong Quarter

eBay (NASDAQ: EBAY) announced second-quarter 2019 results on Wednesday after the market closed, including accelerated adjusted earnings growth and revenue near the high end of its expected range.

More importantly -- and while its top-line growth remains modest -- the online marketplace's buyer base continues to expand, and its efforts to capture incremental business through new payment and advertising solutions are starting to yield more tangible fruit. The company also confirmed it's reviewing the way forward for two of its noncore businesses, StubHub and Classifieds, in an effort to maximize shareholder value and better focus on its primary growth initiatives.

Shares are up around 6% in after-hours trading, so let's get a better idea of what eBay had to say as it enters the second half.

eBay sign on a modern windowed building.

IMAGE SOURCE: EBAY.

eBay results: The raw numbers

Metric Q2 2019 Q2 2018 Year-Over-Year Growth
Revenue $2.687 billion $2.640 billion 1.8%
GAAP net income from continuing operations $403 million $638 million (36.8%)
GAAP earnings per diluted share $0.46 $0.64 (28.1%)

Data source: eBay.

What happened with eBay this quarter?

  • Revenue grew 4% on a constant currency basis.
  • Adjusted for one-time items, eBay's (non-GAAP) net income climbed 10.5% year over year to $589 million and -- thanks to stock repurchases, including 40 million shares bought back for $1.5 billion this quarter -- grew 28.3% on a per-share basis to $0.68.
  • These ranges compare favorably to eBay's guidance provided three months ago, which called for revenue between $2.64 billion and $2.69 billion (assuming constant currency growth of 2% to 4%) and adjusted earnings per share of $0.61 to $0.63.
  • Gross merchandise volume (GMV) fell 4% as reported and remained flat at constant currencies at $22.6 billion. 
  • Active buyers grew 4% across eBay's platforms to 182 million, up from 180 million last quarter.
  • Marketplaces revenue grew 1% as reported and 3% at constant currency, to $2.2 billion, with Marketplaces GMV of $21.5 billion.
  • StubHub revenue grew 7% to $264 million on a 5% increase in GMV to $1.1 billion.
  • Classifieds revenue grew 5% as reported and 12% at constant currency, to $271 million.
  • 940,000 active sellers promoted over 250 million listings this quarter (up from 800,000 and 200 million, respectively, last quarter), resulting in a 130% constant currency increase in related revenue to $89 million.
  • Over 6,000 sellers opted into eBay's new payments platform, generating a 24% sequential increase in GMV from last quarter to over $270 million.
  • eBay recently reached a deal with Paytm Mall to bring eBay's global inventory to one of India's largest online marketplaces.
  • eBay also recently agreed to sell its flash sale German business, brands4friends, and is "actively reviewing the role and value of StubHub and Classifieds in its portfolio to determine the best path forward to maximize shareholder value."

What management had to say

"We remained focused on building our active buyer base, delivering outstanding customer experiences, and accelerating our growth initiatives in the second quarter," stated eBay CEO Devin Wenig. "Managed payments continues to exceed expectations, while first party advertising is providing significant benefits to sellers, and new features are making our marketplace easier to use."

Looking ahead

For the third quarter of 2019, eBay sees revenue between $2.61 billion and $2.66 billion, good for organic constant currency growth of 1% to 3%, with adjusted earnings per share from continuing operations of $0.62 to $0.65.

As a result, eBay now expects full-year 2019 net revenue between $10.75 billion to $10.83 billion, down from its prior range of between $10.83 billion and $10.93 billion. However, it appears that that adjustment was largely driven by the impact of foreign currencies, as the new range continues to assume organic currency-neutral revenue growth of 2% to 3%. Meanwhile, on the bottom line, eBay raised its outlook to call for adjusted earnings per diluted share from continuing operations of $2.70 to $2.75, up from $2.64 to $2.70 previously.

Coupled with the progress of its payments and advertising solutions and its potentially lucrative impending divestments, this was another solid quarterly beat and raise that rightly leaves investors excited for what's to come -- and I think eBay stock is simply responding in kind.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has the following options: short October 2019 $37 calls on eBay and long January 2021 $18 calls on eBay. The Motley Fool recommends eBay. The Motley Fool has a disclosure policy.

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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