eBay Is No Amazon, But It’s In Better Shape Than Before
Time and time again, corporate breakups have led one or both of the broken-up companies to perform much better than they did before, as the breakup produces more focused and agile management teams that are better equipped to handle the challenges a business is facing. HP Enterprise is starting to look like a good example. It might be time to add eBay (EBAY) - Get Report, now a year removed from splitting with PayPal (PYPL) - Get Report , to the list.
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eBay, which rose 10.9% today and made new 52-week highs, topped analyst estimates for the second quarter in a row yesterday afternoon, and this time also announced a $2.5 billion stock buyback and issued strong full-year guidance.
The company now expects 2016 revenue of $8.85 billion to $8.95 billion and EPS of $1.85 to $1.90, largely favorable to consensus analyst estimates of $8.82 billion and $1.86.
The sales guidance benefits from the recent acquisition (reportedly for $165 million) by eBay's StubHub unit of international ticket marketplace owner Ticketbis.
Even with Ticketbis helping, the sales guidance still only implies 3.6% annual growth at its midpoint, and a look at the numbers for eBay's core Marketplace unit shows the business is still bleeding share to Amazon (AMZN) - Get Report, whose third-party seller volumes have been soaring. Marketplace revenue rose only 1% annually to $1.8 billion, with the unit's gross merchandise volume (GMV) rising a modest 3% to $19.8 billion.
By contrast, Amazon's North American division saw revenue rise 27% in the first quarter to $17 billion, and its International division saw sales grow 24% to $9.6 billion; the company's second-quarter numbers, due on July 28, should also show strong growth.
But eBay's GMV growth did improve from the first quarter's 1% and the fourth quarter's -3%. The company's structured data initiative -- it aims to better tag and organize eBay product listings, and thereby improve product discovery and create a better browsing experience -- appears to be helping. In its earnings slides, eBay stated about 90% of its listings can be structured, and that about 15 million structured data pages were live as of the second quarter.
An example of an eBay structured data page. Source: earnings slides.
Meanwhile, though Marketplace is still far from a growth business, the same can't be said for eBay's StubHub and Classifieds units. Ahead of the Ticketbis deal's closing, StubHub revenue rose 40% to $225 million, an acceleration from the first quarter and fourth quarter's 34% growth.
Classifieds revenue, much of which comes from European markets where Craigslist has a limited presence, grew 15% for the second straight quarter, and amounted to $207 million.
This growth is admittedly coming at a cost: eBay's cost of revenue rose to 21.4% of revenue from 19.8% a year ago, and its operating expenses grew to 49.5% of revenue from 48%. Higher PayPal transaction costs following eBay's split with the company played a role, as did a stronger dollar and increased R&D spending.
And Amazon's recent efforts to win over the many Chinese eBay merchants exporting smaller items poses a new threat to Marketplace's growth.
But for the time being, eBay has punched a hole in the narrative that the company is guaranteed a long-term decline as Amazon keeps gaining ground.