Markets

Why eBay Stock Dropped Today

What happened

Shares of eBay (NASDAQ: EBAY) were down 9.6% as of 3:15 p.m. EDT after the e-commerce leader announced reasonably solid third-quarter results but followed with a disappointing forward outlook.

So what

Regarding the former, eBay's quarterly revenue was roughly flat on a year-over-year basis, at $2.649 billion, but would have increased 2% had it not been for the negative impact of foreign-currency exchange. On the bottom line, that translated to adjusted net income from continuing operations of $563 million, or $0.67 per share, up 19% from $0.56 per share in the same year-ago period. By comparison, revenue was within eBay's guidance range of $2.61 billion to $2.66 billion that was provided in July, while earnings arrived well above the company's target for $0.62 to $0.65 per share.

Man's hand holding a white box next to his notebook computer. His other hand is on the keyboard.

IMAGE SOURCE: GETTY IMAGES.

eBay interim CEO Scott Schenkel noted the company's third-quarter performance was roughly in line with internal expectations, "while improving the Marketplace experience, creating better customer outcomes, and maintaining momentum in advertising and payments." 

The company's number of active buyers grew 4%, to 183 million this quarter. But revenue from its core Marketplace segment also grew a modest 1% at constant currencies, to $2.1 billion, and gross merchandise volume fell 2% at constant currencies, to $20.5 billion.

Now what

For the current fourth quarter of 2019, eBay sees revenue of between $2.77 billion and $2.82 billion, good for a change in organic currency-neutral growth of negative 1% to positive 1%, with adjusted net income per share of $0.73 to $0.76. Most analysts were modeling earnings near the top end of that range on revenue of $2.85 billion.

In the end, it's clear the market isn't pleased with that outlook. And with eBay up around 36% year to date leading into this report, it's no surprise to see the stock pulling back today in response.

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