North America

Earnings Preview: eBay Inc. Q4 2016 (EBAY)

By: Craig Bowles

Overview

eBay, Inc. (EBAY) is slated to report 4Q2016 earnings after the bell on Wednesday, January 25th. 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 $0.52 to $0.54. Analyst consensus is $0.54 (range $0.51 – $0.55). (Source: Yahoo! Finance) Consensus was $0.54 three months ago.
  • Revenues: Guidance is $2.36 bln to $2.41 bln. Analyst consensus expectations are for $2.40 bln (range $2.34 bln to $2.43 bln).

Adjusted Earnings Per Share (EPS) and Revenue Guidance for 1Q2017 and FY2017:

  • Adjusted Earnings Per Share (EPS) Guidance (1Q 2017): Analysts expect $0.50 (range $0.44 – $0.54).
  • Revenue Guidance (1Q 2017): The Street is looking for $2.22 bln (range $2.16 bln to $2.25 bln).
  • Adjusted Earnings Per Share (EPS) Guidance (FY 2017): Analysts expect $2.07 (range $1.94 – $2.28).
  • Revenue Guidance (FY 2017): The Street estimate is $9.38 bln (range $9.17 bln to $9.63 bln).
  • eBay’s trailing P/E is 18.9; Price/Book of 5.0 compares to a five-year average of 3.5; Price/Sales of 4.0 compares to a five-year average of 4.0; Price/Cash Flow of 10.9 compares to a five-year average of 10.8.
  • Analysts view eBay with 17 (16 last qtr) Buy, 19 Hold, and 3 Sell ratings. (source: MarketBeat.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 7.89%. Options are pricing in an implied move of 7.65% off earnings.

Recent News

  • 01/13: Monness, Crespi & Hardt has a Buy rating on eBay and Etsy (ETSY) and proposes merging the two companies to take on Amazon.com, according to a post by Barron’s.com.
  • 01/03: Aegis Capital initiated coverage of eBay Inc with a Buy rating citing a “rare value Internet stock with growth potential,” according to a post by Benzinga.com.
  • 10/21: Susquehanna Financial Group suggested that investors ‘Buy It Now’ after eBay’s Q3 results disappointed citing the turnaround remains on track, solid free cash flow, strong capital returns (as evidenced by the aggressive buybacks), asset monetizations (Mercado Libre), and steady (to potentially improving) growth rates, according to a post by Barron’s.com.

Technical Review

Having completed three legs up since the 2010 low is a bit of a worry. eBay shares made an all-time high of $33.19 at the end of September 2016. Point and figure technicians have a tentative bullish price objective of $53. (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. The company has beaten analyst consensus by an average of 1c for the past four quarters. Estimize consensus for Non-GAAP EPS of $0.53 on revenue of $2.411 bln compares to analyst consensus of $0.54 on revenue of $2.40 bln. Q1 and FY2017 guidance will be interest.

 

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