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eBay (EBAY) Lifts Q2 Guidance Amid Coronavirus Pandemic

eBay’s EBAY shares gained 6.3% after the company raised its second-quarter 2020 guidance.

The company now projects revenues within $2.75-$2.8 billion, up from the previous guided range of $2.38-$2.48 billion, indicating year-over-year growth of 13-16%. Notably, the Zacks Consensus Estimate for the same is pegged at $2.48 billion.

In addition, non-GAAP earnings are expected within $1.02-$1.06 per share, up from the previous expectation of 73-80 cents. The Zacks Consensus Estimate for the same is pegged at 77 cents per share.

eBay provided no update on its revenues and earnings guidance for full-year 2020. However, the company expects its full-year performance to be above the ranges announced during first-quarter earnings call.

Earlier, the company had guided full-year revenues within $9.56-$9.76 billion, indicating FX-neutral growth of 1-3%, and adjusted earnings per share in the range of $3.00-$3.10.

eBay Inc. Price and Consensus

 

Reason Behind the Guidance Increase

eBay stated that the company is “performing significantly better than expectations shared in its earnings release on April 29”.

The company also stated that global gross merchandise volume (GMV) was strong in April, which continued through May. Additionally, the company’s number of active buyers increased. It added six million active buyers during the months of April and May.

Moreover, its verticals, namely Home & Garden, Electronics, Fashion, Auto Parts, and Collectibles are seeing strong demand. The increased demand is being driven by a number of factors like organic traffic, enhanced marketing, and higher conversions on its platform.

During the first quarter, though the coronavirus-induced shelter-in-place situation benefited the Marketplace platform, it impacted the Classifieds platform.

Now, the company expects classified-ad revenues to perform well in the near term as automotive subscription revenues appear to be recovering, driven by reopening of dealerships across international markets.

Q1 at a Glance

eBay delivered strong first-quarter 2020 results. The company’s non-GAAP earnings per share of 77 cents surpassed the Zacks Consensus Estimate by 4.1%. Also, the bottom line improved 19% year over year and 4.9% sequentially.

In addition, net revenues of $2.4 billion surpassed the Zacks Consensus Estimate of $2.3 billion. The top line was up 1% from the prior-year quarter on an FX-neutral basis but down 1.6% on a reported basis.

During the quarter, the company witnessed solid momentum across managed payments offerings, which processed in excess of $3 billion of GMV for more than 32,000 sellers. Further, eBay’s Promoted Listings delivered robust performance by generating revenues of $137 million in the first quarter, up 109% from the year-ago period, courtesy of growing momentum across sellers. Notably, above 310 million listings were promoted by 1.2 million sellers.

eBay continues to enhance shareholders’ value through dividends and share repurchases. In the first quarter, the company repurchased $4 billion of shares and paid dividend of $114 million, returning a total of $4.1 billion to shareholders.

Wrapping Up

E-commerce, which has already become part and parcel of lives in today’s fast-paced world, is much more in demand now owing to COVID-19-led social distancing protocols, quarantine and lockdowns, along with rising fears of contracting the virus.

All these are strengthening online retail shopping, bolstering the adoption rate of online payment solutions and boosting m-commerce user penetration rate, which in turn are driving the worldwide e-commerce market.

We believe eBay’s growth initiatives, which are based on enhancing seller experience by offering innovative seller tools and delivering improved buyer experience by utilizing structured data, will help it gain in the current scenario.

However, stiff competition from Amazon AMZN and other online marketplaces remain a major concern.

Zacks Rank and Other Stocks to Consider

eBay currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the broader technology sector include Wayfair Inc. W and Inphi Corporation IPHI. While Wayfair sports a Zacks Rank #1 (Strong Buy), Inphi carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Wayfair and Inphi is currently projected at 23% and 37.7%, respectively.

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