eBay (EBAY) reported a decline in Q2 revenue from the year-ago quarter, while earnings remained flat compared to the year-ago quarter. The slowdown is expected to persist in Q3, with the e-commerce giant projecting a revenue decline.
However, the company delivered better-than-expected results in the second quarter. As a result, the stock gained a little over 4% to close at $50.48 on August 3, 2022.
Q2 Earnings Snapshot
Revenue in the quarter decreased 9% to $2.4 billion from the year-ago quarter. However, it was marginally better than analysts’ expectations of $2.37 billion. The decline came as gross merchandise volume (GMV) fell 18% from the year-ago quarter to $18.5 billion. Advertising offerings generated $275 million in revenue, representing 1.5% of GMV.
eBay delivered diluted earnings per share (EPS) of $0.99, flat compared to the year-ago quarter. However, the figure beat consensus estimates of $0.91 a share.
During the quarter, eBay returned $1.4 billion to shareholders, made up of $1.3 billion in share repurchases and $121 million paid in cash dividends.
The board of directors has declared a cash dividend of $0.22 a share to be paid on September 16, 2022, to shareholders of record as of September 1, 2022.
eBay also sold part of its shares in Kakao Bank for $242 million and a portion of shares in Adyen for $129 million. It also acquired KnownOrigin, all but expanding its footprint into the non-fungible token marketplace.
eBay Lowers Q3 and Full-Year Revenue
eBay expects Q3 revenue to range between $2.29 and $2.37 billion, representing a 5% to 2% decline from the year-ago quarter. Diluted earnings per share (EPS) are expected to range between $0.89 and $0.95.
Full-year revenue is expected to range between $9.6 and $9.9 billion, representing a 6% to 3% decline from the year-ago period. On the other hand, full-year diluted EPS is expected to be in the range of $3.95 and $4.10.
Despite the decline in revenue and gross merchandise volume, Chief Executive Officer (CEO) Jamie Lannone insists the results affirm solid progress on long-term initiatives.
Declining Website Traffic Predicted the Weak Results
eBay’s weak performance shouldn’t have surprised you if you have been a TipRanks user who leverages the website traffic screener. eBay’s decreased website traffic on a quarterly basis already indicated weak Q2 results.
According to the tool, the eBay website recorded a 3.79% quarterly decrease in global visits to 705.64 million in Q2 compared to the previous quarter. Furthermore, year-to-date, eBay website traffic decreased by 18.52%, compared to the same period last year.
Decreased online activity signals the company is experiencing some form of slowdown.
Is eBay Stock Expected to Rise?
Well, the Street is sitting on the fence with a Hold consensus rating, based on eight Buys, 14 Holds, and two Sells. However, the average eBay price target of $53.24 implies 5.5% upside potential from current levels. Thus, we can safely assume that there is an expected upside to the stock price of EBAY.
Key Takeaway for Investors
Based on the drop in revenues and GMV in Q2, eBay appears to be in a phase of slow growth. The company’s lowered guidance for Q3 and full-year also hints at a continued slowdown heading into the second half of 2022.
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