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eBay Delivers Better than Promised Results

Posted on Friday, Jan 27th 2017

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eBay (Nasdaq: EBAY) finally appears to be taking a turn for the better. Not only did eBay deliver better than expected results during the holiday quarter, it also improved some of its operational metrics. But its outlook still continued to disappoint the market.

eBay’s Financials

eBay’s Q4 revenues grew 3% over the year to $2.59 billion, ahead of the Street’s expectations of $2.4 billion. EPS of $0.54 was also ahead of the market’s forecast of $0.53 for the quarter.

During the quarter, eBay added 2 million active buyers across its platforms, ending the year with 167 million global active buyers. The Marketplace segment saw $21.1 billion in Gross Merchandise Value (GMV) of goods sold to deliver $1.9 billion of revenues. Marketplace revenues grew 4% on an Fx neutral basis. StubHub also saw a strong quarter with GMV growing 5% to $1.2 billion and revenues increasing 20% to $279 million. The Classifieds segment reported revenues of $201 million, growing 13% over the year on a constant currency basis.

eBay ended the year with revenues growing 5% to $8.98 billion and EPS growing 3% to $1.88.

For the current quarter, eBay forecast revenues of $2.17 billion-$2.21 billion with an EPS of $0.46-$0.48. The Street was looking for revenues of $2.2 billion for the quarter with an EPS of $0.50. eBay expects to end the current year with revenues of $9.3 billion-$9.5 billion with an EPS of $1.98-$2.03. The Street was looking for revenues of $9.36 billion and EPS of $2.07.

eBay’s Initiatives

During the quarter, eBay benefited from several initiatives across its platforms. Mobile within Marketplace is beginning to become a big contributor. For the first time ever, sales on mobile platform crossed the $10 billion GMV milestone. It continues to expand inventory and leverage other businesses for its growth. Recently it integrated inventory for Marketplace with Gumtree in the United Kingdom and eBay Kleinanzeigen in Germany. eBay had bought Gumtree, a UK-based Classifieds website back in 2005 and Kleinanzeigen, a German classified site in 2015.

Additionally, to drive sales of higher value products, eBay recently launched Authenticate. eBay Authenticate is a program that will leverage a network of professional authenticators to ensure that customers get what they are expecting from a sale for higher priced products. The service will add to the confidence level of buyers shopping through eBay for the high-end inventory. The program will allow both sellers and buyers to opt in to its service. For a fee, on sale of an item, the authenticators will inspect the product before shipping it to the buyer. The program is being launched for high-end fashion products initially and, if successful, will be expanded to other categories.

eBay can take a few lessons from Auctionata on this topic. In 2014, I had met with Auctionata’s founder Alexander Zacke, who has built an online art auction house that is supported by art experts who evaluate art for sale on the website. Users are able to upload the image of the piece of art that they would like to have evaluate along with some basic information. Its talent pool of experts charges a fixed fee for the valuation and provides it to the requester.

The moves are expected to help eBay beat some of the rising competition from the likes of Facebook and Alphabet. Facebook’s forays into e-commerce are expanding as it allows users to order food, movie tickets, get quotes from local businesses, and make appointments.

Its stock is currently trading at $31.74 with a market capitalization of $35.8 billion. It touched 52-week high of $33.19 in September last year and had fallen to a low of $21.52 in February a year ago.

Photo Credit: Mike Knell/Flickr.com

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