Global digital marketplace platform
eBay NASDAQ: EBAY stock shares sold off on fears of slowing growth from its Q3 2021 earnings report. The Company is seeing growth in its authenticated luxury and
collectibles segment showing double digit growth. However, global buyers saw a
contraction as sellers remained flat which general merchandise value (GMV) actually shrank (-10%) from the year ago same quarter. This initially caused a gap down that make a
sharp bounce leaving investors to ponder if the Company can maintain its growth in the post-
pandemic reopening. The Company is set to receive a $3 billion cash injection on the sale of a division of eBay Korea. The eBay managed payments
transition is expected to complete this year with over 90% of volume being
processed and over 18 million sellers having switched. Prudent investors seeking exposure in global
e-commerce on the world’s largest marketplace platform can watch for opportunistic pullbacks in shares of eBay.
Q1 FY 2021 Earnings Release
On Oct. 27, 2021, eBay released its fiscal third-quarter 2021 results for the quarter ending September 2021. The Company reported an earnings-per-share (EPS) profit of $0.90 excluding non-recurring items versus consensus analyst estimates for a profit of $0.88, beating estimates by $0.02. Revenues rose 10% on an FX neutral basis year-over-year (YoY) to $2.5 billion versus $2.46 billion analyst estimates. Gross merchandise value (GMV) fell (-10%) YoY to $19.5 billion. Annual active buyers fell (-5% YoY) to 154 million. Annual active sellers were flat at 19 million global sellers. The Company raised its estimated share buyback from $5 billion to $7 billion. eBay CEO Jamie lannone commented, "Our team delivered another strong quarter, once again meeting or surpassing our expectations for all key business metrics, making further progress on our multi-year strategy. Our Q3 results, driven by the near completion of our managed payments migration, expansion of our advertising portfolio, and volume growth in our focus categories, demonstrate that our strategic playbook continues to work. I'm proud that we've been able to increase customer satisfaction, build trust, and drive steady innovation, all while continuing to set and make progress toward our ambitious goals tied to climate action."
Weak Q4 2021 Guidance
The Company provided mixed guidance for Q4 2021 for EPS coming in between $0.97 to $1.01 versus $1.00 consensus analyst estimates with revenues coming in between $2.57 billion to $2.62 billion versus $2.65 consensus analyst estimates.
Conference Call Takeaways
eBay CEO, Jamie lannone set the tone, “I'm pleased to report that all key business metrics either met or surpassed our expectations in Q3. Revenue over-performed growing 10%, driven by an acceleration in the payments migration and promoted listings growth. We also delivered $0.90 of non-GAAP EPS at the high-end of expectations while increasing technology investments. GMV performed in line with expectations globally, declining 12% versus last year and increasing 9% compared to 2019. Excluding transitory macro impacts, we continue to see modestly positive underlying growth in the business. Global active sellers remained unchanged at 19 million and total active buyers were 154 million.” He continued, “Another ongoing transformation of our marketplace is managed payments, which progress quickly during the quarter. In Q3, we processed over 90% of on-platform GMV, and remain on track to finish by the end of this year. I'm thrilled that we're close to migrating all of our global sellers to a next-gen product experience. While we are close to completing the transition, we are only at the beginning of realizing our full payments potential. Owning the entire seller and buyer journey unlocks opportunities to remove friction, improve trust, and provide new capabilities to sellers and buyers. We are already starting down this path, and here are few examples. Last quarter, we effectively eliminated unpaid items on fixed-price transactions and have continued to reduce this issue for best offers. In the UK, we're paying many sellers as quickly as next business day after buyer payment is confirmed. Based on community feedback, we've reduced another pain point for trusted sellers by increasing protection against fraudulent returns by requiring photos and providing returns shipping credits. In addition, we continue to improve our stores experience to make eBay the seller platform of choice. We've been increasing our traffic to stores and providing more CRM capabilities to make managing their businesses on eBay easier than ever. Sellers are leveraging these new features to drive repeat purchases. For example, in only 6 months since launch, more than 2.5 million buyers have completed a repeat purchase from a store using our new seller funded coupons.”
Collectibles and Luxury Products
CEO lannone updated on the strategy to cross sell and acquire buyers ,” As I've mentioned in the past, part of our strategy is to drive enthusiasts to new trusted experiences, and then leverage those buyers across our vast supply in other categories. The average buyer who purchases sneakers and luxury watches spends approximately $2000 and $8000 respectively in other categories. We are seeing the exact same behavior in our latest focus category. Buyers of authenticated handbags are spending over $5,000 outside of handbag. This cross-category benefit for sellers and buyers as a unique advantage for eBay. One of the reasons our growth has improved in luxury categories is the improvement in buyer and seller trust. We recently celebrated the one-year anniversary of authenticity guarantee, having now processed over 1.4 million items across multiple categories. Customer satisfaction has consistently exceeded 90%, and we are operating in 5 countries with a mix of in-house and third-party resources.”
EBAY Opportunistic Pullback Levels
Using the rifle charts on the weekly and daily time frames provides a precision near-term view of the price action landscape for EBAY stock. The weekly rifle chart had a pup breakout that peaked in the $80.96 Fibonacci (fib) level. Shares collapsed on earnings reaction to bottom out quickly at the $70.77 fib before coiling back up to test the 5-period moving average (MA) at $76.57. The quick reversion caused the weekly stochastic to form a bullish mini pup stochastic as it nears the 80-band. The weekly upper Bollinger Bands (BBs) sit at $82.42. The daily rifle chart formed a market structure high (MSH) sell signal on the breakdown below $78.40. The falling 5-period MA sloped back up as EBAY bounced off the daily lower BBs to form a make or break with a rising 5-period MA at $75.70 which needs to crossover up through the 15-period MA at $76.41. The daily market structure low (MSL) buy signal triggered on the bounce above $74.99. Prudent investors can watch for opportunistic pullback levels at the $74.98 fib/daily MSL trigger, $73.77 fib, $72.44 fib, $71.28 fib, $69.33 fib, $67.96 fib, and the $66.58 fib level. Upside trajectories range from the $80.96 fib up towards the $89.32 fib level.
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