North America

Earnings Preview: eBay Inc. Q2 2017 (EBAY)

By: Craig Bowles

Overview

eBay, Inc. (EBAY) is slated to report 2Q2017 earnings after the bell on Thursday, July 20th. 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.

Outliers & Strategy

Key measures:

  • Non-GAAP Earnings Per Share (EPS): The value for Non-GAAP EPS is typically comparable to consensus estimates. Guidance is $0.43 to $0.45. Analyst consensus is $0.45. (Source: Yahoo! Finance) Consensus was $0.47 three months ago.
  • Revenues: Guidance is $2.28 bln to $2.32 bln. Analyst consensus is $2.31 bln. Consensus was $2.32 bln three months ago.

Adjusted Earnings Per Share (EPS) and Revenue Guidance for 3Q2017 and FY2017:

  • Adjusted Earnings Per Share (EPS) Guidance (3Q 2017): Analysts expect $0.48 (range $0.46 – $0.52).
  • Revenue Guidance (3Q 2017): The Street is looking for $2.32 bln (range $2.28 bln to $2.37 bln).
  • Adjusted Earnings Per Share (EPS) Guidance (FY 2017): Guidance is currently $1.98 to $2.03. Analysts expect $2.01.
  • Revenue Guidance (FY 2017): Guidance is currently $9.3 bln to $9.5 bln. The Street estimate is $9.41 bln.
  • eBay’s trailing P/E is 5.3; Price/Book of 3.4 compares to a five-year average of 3.5; Price/Sales of 4.5 compares to a five-year average of 4.0; Price/Cash Flow of 14.9 compares to a five-year average of 10.8.
  • Analysts view eBay with 14 (16 last qtr) Buy, 20 Hold, and 1 Sell ratings. (source: MarketBeat.com)
  • Insiders sold 253,129 shares the last three months and 13,160,471 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 7.22%. Options are pricing in an implied move of 5.68% off earnings.

Recent News

  • 06/05: Credit Suisse upgraded eBay to Outperform from Neutral with a price target of $44.00 (from $34.00) while saying the stock remains a turnaround story, Marketplace growth is stable and has the potential to accelerate in 2H17/2018, driven by platform changes and product innovation. In addition, Stubhub growth is attractive, and the Classifieds business is underappreciated by the Street given a direct European comp with a healthy multiple, according to a post by StreetInsider.com.
  • 05/09: Baird reiterated an Outperform rating on eBay but noted that the analyst’s proprietary eBay tracker showed an April slowdown that is most likely Easter related, according to a post by StreetInsider.com.
  • 05/08: Sohn contest winner Dillon Adelman’s Long Idea is eBay citing that in-housing merchant record, can realize $1B a year starting in 2020. Also, the market is not accounting for eBay classified… its worth $12B based on 10% growth, 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. eBay shares are trading at $37.07 for another all-time high. The stock underperformed during the Trump rally, so 2017 possibly benefitted from rotation out of those sectors that outperformed. Balance area support starts at $32. Having spent four years trading mostly in the $20s, quite a base of support was built up there. (Chart courtesy of StockCharts.com)

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. Another buyback announcement would seem timely. The company has beaten analyst consensus by an average of 1c for the past four quarters. Estimize consensus for Non-GAAP EPS of $0.46 on revenue of $2.313 bln compares to analyst consensus of $0.45 on revenue of $2.31 bln. The outlook for Q3 and any change in FY2017 guidance will be interest.

 

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