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eBay Looks Flat

Posted on Thursday, Jul 24th 2014

According to a comScore report, online retail spending grew 14% last year compared with a single digit growth in overall retail spending. The report reveals that while mobile transactions are a fast growing segment, the online sales are still dominated by PC-based sales.    

eBay’s Financials
eBay’s (Nasdaq: EBAY) second quarter revenues grew 13% over the year to $4.37 billion, short of the Street’s expectations of $4.39 billion. EPS of $0.69 was marginally ahead of the market’s expectations of $0.68 for the quarter.

By segment, revenues from PayPal accounted for $1.9 billion with payment volume at PayPal business growing 29% over the year. During the quarter, PayPal added 4 million new accounts, growing 15% over the year and ended the quarter with 152 million accounts. Gross Merchandise Volume for their marketplace segment increased 12% over the year with mobile volume increasing 68% to $12 billion. Marketplace revenues increased 9% over the year to $2.17 billion.

eBay expects to end the current quarter with revenues of $4.3 billion-$4.4 billion, and earnings of $0.65-$0.67 per share. The Street was looking for revenues of $4.42 billion with an EPS of $0.70. eBay expects to end the year with revenues of $18 billion-$18.30 billion and EPS of $2.95-$3.00 compared with market projections of revenues of $18.27 billion.

eBay’s Worries
eBay has been going through a rough patch recently. Last May, the company’s website suffered a severe cyber attack where more than 145 million active users lost some of their critical personal information to hackers. Hackers stole personal information such as birth dates, email addresses and other relevant identity-related information from the site. eBay’s comparatively modest performance of the Marketplace segment was attributed to this cyber attack. No financial or credit card related information was stolen.

Additionally, Google has also changed the algorithm behind their Panda search feature recently. The revised algorithm is aimed at weeding out poor content sites as part of the search results. While eBay contends that they will not be impacted by the algorithm change, analysts believe that it may not be the case. eBay is expected to be one of the big losers impacted by the change.

eBay’s Acquisition
Last month, eBay announced the acquisition of machine translation technology from AppTek for an undisclosed sum. Viriginia-based AppTek has developed machine translation software that will help eBay improve their international offerings. Currently, nearly 20% of eBay’s sales involve cross border activities. The acquisition will help eBay provide a better communication tool for buyers and sellers from different regions. eBay’s in-house developed translation technology includes listing details and item description for regions like Russia, Brazil, Mexico, and a few European countries. The company has been focusing on expanding international presence. During the recently ended quarter, the international marketplace revenues grew 12% over the year compared with 10% growth in the domestic markets.

eBay’s stock is trading at $52.66 with a market capitalization of $65.3 billion. It touched a 52-week high of $59.70 in February this year. By and large, there isn’t a lot of excitement at eBay these days, and no great breakthroughs!

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