EBay Sees a 2Q Benefit from Brexit-Related Currency Fluctuations

The e-commerce platform just beat expectations for the quarter and noted that Brexit has worked in its favor. But is it time to invest?
By Kat McKerrow ,

E-commerce platform eBay (EBAY) - Get Report announced second-quarter earnings late Wednesday that beat Wall Street expectations and sent its stock shooting more than 11% higher on Thursday.

Earnings reflected a second positive consecutive quarter, a key indicator of the company's health in the year following its split from PayPal. With its somewhat rocky start out of the way, it looks like this might be time for investors to consider their own bids on the online auction site's stock.

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For the quarter, eBay reported earnings minus items of 43 cents a share, versus the consensus estimate of 42 cents. The company also reported a revenue increase of 6%, to $2.2 billion, above Wall Street's expectation of $2.17 billion.

For the full year, eBay forecast revenue of $8.85 billion to $8.95 billion, above analysts' consensus estimation of $8.8 billion. And the company expects earnings per share of between $1.85 and $1.90, compared with the consensus forecast of $1.86.

However, eBay's third-quarter estimates are weaker than Wall Street's.

The company forecasts revenue of $2.16 billion to $2.19 billion, whereas the analysts' consensus stands at $2.14 billion. The company also predicts third-quarter earnings minus items of 42 cents and 44 cents, compared with the street's consensus of 44 cents.

One of the most intriguing clues to eBay's business came from a statement made by Chief Financial Officer Scott F. Schenkel during the quarterly earnings call.

He told analysts that eBay has experienced "a boost in U.K. exports, which is driving a strong start to the quarter for our international business ... We have yet to see the impact of an economic slowdown on the U.K. domestic marketplace."

It would appear that currency fluctuations due to the Brexit are making international eBay shopping more attractive to customers, giving the company a boost.

This makes eBay a U.S. technology stock with exposure to the U.K. market that could actually be Brexit-proof and puts it in the same category as blue-chip stalwart IBM, which registered little effect from the Brexit in its recent quarterly results.

The two companies are among the first to report quarters that ended after the U.K. referendum.

However, eBay did note that it registered lower U.S. imports to the U.K., but it will be interesting to watch how this scenario plays out in coming quarters as the surprise Brexit vote continues to rock the markets.

It looks like eBay is finally coming out of the shadow of its parent, PayPal, and is ready to be an e-commerce power player and profit maker in its own right. Although it may not be the next Amazon, investors looking to get in on e-commerce should consider this company as it looks to round out its first successful year.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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