EBay Falls After-Hours Despite ‘Superb’ Beat & Raise Quarter

Shares in EBay (EBAY) dropped 3% in Tuesday’s after-hours trading, despite the company reporting a clean beat and raise quarter.

Specifically, Q2 Non-GAAP EPS of $1.08 beat Street estimates by $0.02 while GAAP EPS of $1.04 also topped consensus expectations by $0.23.

Meanwhile revenue of $2.87B surged 18.6% year-over-year and soared past consensus by $70M. Revenue strength was driven by new Buyer/Seller growth primarily due to a demand surge from shelter-in-place restrictions and store closures, as well as the continuing roll-out of Payments and marketing efforts.

Also impressive was gross merchandise volume (GMV) which rose 26% year-over-year to $27.1B beating consensus of $25.85B. That was as active buyers also increased by 5% from the previous year period to 182M, again topping consensus expectations of 181.5M.

“Our team’s focus on supporting small businesses and communities during a period of heightened need allowed us to re-engage our existing buyers and sellers while introducing approximately 8 million new customers to our platform during the quarter,” said Jamie Iannone, CEO.

For the full year, EBAY now expects net revenue between $10.56B and $10.75B, vs $10.42B consensus, with GAAP EPS of $2.85 – $3.00 and Non-GAAP EPS of $3.47 – $3.59. It also intends to pay out a dividend of $0.16 per share on September 18, 2020.

“All in, fundamental trends were superb” cheered RBC Capital analyst Mark Mahaney following the report. “eBay reported clean Beat & Raise Q2 results, with 15-year high GMV growth & 5-year high Operating Margins.”

However the analyst reiterated a hold rating on the stock while raising his price target from $45 to $57. “Online Retail is dramatically more competitive now than it was 15 years ago, and eBay’s competitive position is much weaker” explains Mahaney.

He notes that the surge of new Buyers creates an opportunity for EBay only if it can retain them. And despite a better/more-balanced marketplace growth strategy, he believes the odds are stacked against it. “Revenue Growth deceleration is highly likely, which will pressure the current multiple…which will make it very hard for eBay shares to outperform from here” the analyst concludes.

Overall, EBay shows a cautiously optimistic Moderate Buy Street consensus. With the stock up 56% year-to-date, the average analyst price target indicates upside potential from current levels of just 5%. (See EBAY stock analysis on TipRanks).

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