North America

Earnings Preview: eBay Inc. Q1 2017 (EBAY)

By: Craig Bowles

Overview

eBay, Inc. (EBAY) is slated to report 1Q2017 earnings after the bell on Wednesday, April 19th. The earnings release is expected at approximately 4:15 p.m. ET with a conference call to follow at 5:00 p.m. and webcast through eBay Investor Relations. This internet consumer-to-consumer corporation is now a multi-billion dollar business with operations localized in over thirty countries and a component of the S&P 500 and NASDAQ 100 indexes. After the July 17, 2015 spin-off, each eBay shareholder received one share of PayPal common stock per eBay share.

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Outliers & Strategy

Key measures:

  • Non-GAAP Earnings Per Share (EPS): The value for Non-GAAP EPS is typically comparable to consensus estimates. Guidance is $0.46 to $0.48. Analyst consensus is $0.48. (Source: Yahoo! Finance) Consensus was $0.50 three months ago.
  • Revenues: Guidance is $2.17 bln to $2.21 bln. Analyst consensus is $2.21 bln. Consensus was $2.22 bln three months ago.

Adjusted Earnings Per Share (EPS) and Revenue Guidance for 2Q2017 and FY2017:

  • Adjusted Earnings Per Share (EPS) Guidance (2Q 2017): Analysts expect $0.47 (range $0.43 – $0.50).
  • Revenue Guidance (2Q 2017): The Street is looking for $2.32 bln (range $2.26 bln to $2.36 bln).
  • Adjusted Earnings Per Share (EPS) Guidance (FY 2017): Guidance is currently $1.98 to $2.03. Analysts expect $2.01. Consensus was $2.07 three months ago.
  • Revenue Guidance (FY 2017): Guidance is currently $9.3 bln to $9.5 bln. The Street estimate is $9.41 bln. Consensus was $9.38 bln three months ago.
  • eBay’s trailing P/E is 5.4; Price/Book of 3.5 compares to a five-year average of 3.5; Price/Sales of 4.4 compares to a five-year average of 4.0; Price/Cash Flow of 13.9 compares to a five-year average of 10.8.
  • Analysts view eBay with 16 Buy, 18 Hold, and 1 Sell ratings. (source: MarketBeat.com)
  • Insiders sold 622,711 shares the last three months and 13,045,000 shares in the past year. (source: NASDAQ.com) In July 2016, an additional $2.5 billion was added to the stock repurchase program. January 2015 had a $2 billion buyback.
  • Having expanded into more traditional online retail, eBay is increasingly compared to Amazon (AMZN). Quarterly results could also impact Google, Inc. (GOOG), Groupon, Inc. (GRPN), Etsy, Inc. (ETSY) andcom (OSTK).
  • eBay shares have a 1-day average price change on earnings of 7.63%. Options are pricing in an implied move of 6.13% off earnings.

Recent News

  • 03/28: Barclays initiated coverage on eBay with an Overweight rating citing the sensitivity around every 10% improvement in conversion rate is significant, adding potentially $500 mln (5%) to revenue at current run rate, according to a post by StreetInsider.com.
  • 03/01: Monness, Crespi, Hardt believes Esty (ETSY) serves a key e-commerce niche that would be better suited for large e-commerce organization. eBay should consider a potential deal, according to a post by StreetInsider.com.
  • 02/17: Pacific Crest initiated coverage on eBay with a Sector Weight rating. The reinvention of itself with structured data and AI has limited fundamental upside potential and already priced in, according to a post by StreetInsider.com.

Technical Review

Whenever a stock goes nowhere for multiple years as eBay did beginning in 2013, the breakout is always underestimated both in magnitude and duration. Despite the overall market’s recent struggles, eBay shares are trading at all-time highs. The stock underperformed during the Trump rally, so is possibly benefitting from rotation out of those sectors that outperformed. Point and figure charts show a steady stream of higher balance areas since 2009. Having spent four years trading mostly in the $20s, quite a base of support was built up. (Chart courtesy of StockCharts.com)

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Summary

eBay’s site overhaul is in the late stages and has some on Wall Street taking more interest given that early indications have been positive. Otherwise, a lack of interest in the company by the financial press is both stunning and exciting. The company has beaten analyst consensus by an average of 1c for the past four quarters. Estimize consensus for Non-GAAP EPS of $0.49 on revenue of $2.231 bln compares to analyst consensus of $0.48 on revenue of $2.21 bln. The outlook for Q2 and any change in FY2017 guidance will be interest.

 

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