The online marketplace giant eBay (EBAY) is set to release second-quarter 2021 earnings on August 11.
Over the past year, shares of the company have gained around 22%, and are now trading at over $65.
Given the pandemic-triggered trend in increased online shopping, it is worth taking a look at this ecommerce stock ahead of the results. Solid Q2 results might propel the stock price upward, so let’s take a closer look at what analysts on the Street are expecting.
Q2 Expectations
For Q2, the Street expects eBay to report adjusted EPS of $0.94 and revenues of $3 billion.
Meanwhile, the Earnings Whisper number, or the Street’s unofficial view on earnings, stands at $0.98 per share. (See eBay Dividend Date and History on TipRanks)
For the second quarter, eBay expects revenues in the range of $2.98-$3.03 billion and non-GAAP earnings to land between $0.91- $0.96 per share
eBay’s Prior Quarter Snapshot
eBay posted solid earnings in the first quarter, with sales growth reaching its highest level since 2005.
The company reported revenues of $3 billion, which were up 42% year-on-year and was above analysts’ estimates of $2.97 billion. The increase was primarily driven by the growing number of sellers who migrated to eBay’s new payments platform.
Meanwhile, non-GAAP diluted EPS improved 59% year-over-year to $1.09 per share and came in ahead of consensus estimates of $1.07 per share.
What to Watch Out for in eBay’s Earnings
This online marketplace has seen a lot of activity in the last year, with both sellers and buyers using eBay’s platform to do business. Specifically in the first quarter, the company saw its core business grow, with strong demand for products such as sneakers, luxury watches, and apparel.
Now, as the economy rebounds from the COVID-19 outage and people return to physical stores, investors will be watching to see if this e-commerce firm can maintain its market share growth in these categories.
To get a better picture of eBay’s upcoming earnings, let’s take a look at a couple of vital metrics.
First, coming to customer metrics, both active sellers and buyers grew 8% and 7% year-over-year, respectively in Q1.
That’s likely due to the company’s efforts to bring in more sellers and buyers to its platform, by offering them innovative tools. For example, the company is empowering sellers with new features that allow them to directly issue coupons to get new buyers. Also, eBay is beefing up inventory and using innovative techniques to attract new customers as well as retain its existing ones.
As a result, in Q2 the company could have witnessed a growth surge in active sellers and buyer, resulting in strong Marketplace volume growth.
Another point worth emphasizing is the company’s advancement in the payment space. The increased use of eBay’s managed payments service is helping the company to increase monetization on its platform, thereby expanding the top-line numbers.
This can be observed in the first quarter’s figures. More than 4 million sellers have switched to managed payments, with more than 80% of them doing so in the United States. Also, the managed payment product processed 52% of all on-platform volumes internationally.
Meanwhile, investors should keep an eye on a few key events that could affect eBay’s future outcomes.
Key eBay Events
During the second quarter, eBay sold its businesses in Korea to Emart. As a result, starting in the second quarter of 2021, eBay’s Korean companies will be reported as discontinued operations.
On June 25, eBay completed the transfer of its Classifieds business to Adevinta for $2.5 billion in cash. Apart from the cash, eBay also received a 44% equity stake in Adevinta, which equals approximately 540 million shares.
With the completion of the transfer, the company increased its share buyback program to $5.0 billion from $2.0 billion.
This massive buyback program is expected to have boosted the shareholders’ confidence in the stock. The investors will likely be waiting to get more colors about the company’s capital allocation strategy during the upcoming conference call.
In other news, on July 14, the company further agreed to reduce its stake in Adevinta to 34% from 44% for approximately $2.25 billion. The deal is expected to close in Q4.
Analysts’ Recommendations
Ahead of the Q2 earnings release, John Blackledge of Cowen reiterated a Neutral rating on the stock but increased the price target to $72.00 from $65.00. This implies 10.2% upside potential to current levels.
Blackledge raised his price target to reflect the sale of eBay’s Korean businesses and management’s decision to increase the share buyback program.
Another analyst Stephen Ju of Credit Suisse reiterated a Buy rating on the stock but increased the price target to $80.00 from $78.00. This implies 22.4% upside potential to current levels.
The analyst remains optimistic about eBay’s free cash flow generation capabilities and believes that eBay could reduce its share count by approximately 20%.
Overall, Consensus among analysts is a Strong Buy, based on 4 Buys and 1 Hold. The average EBAY price target of $75.20 implies 15.1% upside potential from the current levels.
TipRanks data shows that financial blogger opinions are 96% Bullish on EBAY, compared to a sector average of 69%.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
