EBay's Soft Guidance Doesn't Reflect Well on its Attempts to Fight Off Amazon

Jeff Bezos & Co. continue to cast a heavy shadow over eBay (EBAY) , as the online marketplace's latest earnings and guidance make clear.

Key Numbers:

In its latest report, eBay posted Q2 revenue of $2.64 billion (up 9% annually) and non-GAAP EPS of $0.53. EPS, boosted by $1 billion worth of stock buybacks, topped a $0.51 analyst consensus. But revenue slightly missed a $2.66 billion consensus.

In addition, eBay guided for Q3 revenue of $2.64 billion to $2.69 billion and 2018 revenue of $1.75 billion to $10.85 billion, respectively below consensus estimates of $2.73 billion and $10.95 billion. Full-year EPS guidance is solid ($2.28 to $2.32 versus a $2.27 consensus), but Q3 guidance less so ($0.54 to $0.56 versus a $0.56 consensus).

Late in Thursday's session, shares are down over 9% and within $1 of a 52-week low of $33.94.

Takeaways:

  • For the fourth straight quarter, eBay's currency-neutral gross merchandise volume (GMV) growth came in at 7% (in dollars, growth was 11%). U.S. GMV growth fell to 5% from Q1's 7%, while forex-neutral international GMV growth remained at 7%. In addition, eBay's sold item volume was flat in Q2, and active buyers grew just 4%.
  • eBay does promise GMV growth for its core operations will accelerate later this year. However, it's hard to overlook the fact that the total U.S. e-commerce market is believed to be growing over 15%. Or that Amazon.com's (AMZN) North American segment saw 25%-plus revenue growth in Q1 even after backing out the impact of the Whole Foods deal, and that its International segment saw 21% growth. Moreover, Amazon's GMV growth is likely even higher, given the company's ongoing mixed shift towards marketplace sales (on which it only take a cut on revenue) relative to direct sales. 

eBay continues to see limited GMV growth. Source: eBay.

  • The fact that 61% of eBay's Marketplace segment revenue comes from international markets buffers it from Amazon a bit -- Amazon generally isn't as dominant in eBay's big international markets as it is in the U.S. -- as does eBay's continued popularity for buying used merchandise and "long tail" items such as vintage goods and collectibles. However, the long-term trend here is still far from encouraging, as Amazon continues bringing its various competitive strengths (its infrastructure, its shopping experience, Amazon Prime, etc.) to bear against eBay and other rivals.
  • In addition to slow Marketplace growth, StubHub's sales pressures -- caused in part by efforts from many companies to move ticket sales to internal or preferred platforms -- are still weighing on eBay. StubHub revenue growth slowed to 5% in Q2 from 12% in Q1, and CEO Devin Wenig warned on the earnings call that "a softer event landscape" for concert, theater and MLB ticket sales will continue impacting StubHub in the second half of 2018.
  • Higher spending is also hurting eBay's bottom line a little: Operating expenses equaled 53% of revenue in Q2, up from 51.4% a year earlier. On the flip side, gross margin improved to 78.2% from 77.7%, something eBay attributes to improved customer service efficiencies.

Amazon.com is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AMZN? Learn more now.

More from Opinion

Tencent Music's Cool Market Reception Says a Lot About Investor Sentiment Now

Tencent Music's Cool Market Reception Says a Lot About Investor Sentiment Now

Former Trump Legal 'Fixer' Michael Cohen Sentenced to 3 Years in Prison

Former Trump Legal 'Fixer' Michael Cohen Sentenced to 3 Years in Prison

The Real Reason Donald Trump Appears When You Google 'Idiot'

The Real Reason Donald Trump Appears When You Google 'Idiot'

Facebook's Search Test Is a Reminder of Its Untapped Revenue Potential

Facebook's Search Test Is a Reminder of Its Untapped Revenue Potential

Tuesday Turnaround: Google Gets Grilled

Tuesday Turnaround: Google Gets Grilled