SunTrust's Bob Peck Offers 6 Key Takeaways From eBay's Q1

eBay Inc EBAY reported its 1Q results slightly above expectations, while accelerating its share buybacks and raising the low end of its revenue guidance.

Robert S. Peck of SunTrust Robinson Humphrey maintained a Neutral rating on the company, with a price target of $26.

Platform Transformation

Peck mentioned that although the core business seems stable, eBay is likely to continue to implement platform transformation initiatives through end-2016.

“Consequently, we think it may be tough for eBay to drive meaningful user engagement and top line acceleration in the near-term,” the analyst stated.

Modest 1Q Beat

Unit sales growth decelerated slightly from the 4Q levels, driven by fewer new buyers and “lackluster” mobile app experience.

GMV grew 5 percent, ex-FX, while revenue came in above expectations at $2.14 billion, driven primarily by higher M&O revenue at Classifieds and Marketplaces.

Operating margins, however, declined 220 bps year on year, due to dis-synergies from the spin-off, as well as FX and continued investments. The company also bought back stock worth $1 billion, with $835 million remaining from the total authorization.

Guidance

Given the ongoing transformation, “growth expectations have been modest,” Peck noted, while mentioning that the company guided to higher than consensus revenue for 2Q, although the EPS guidance was slightly below consensus.

For the year, eBay raised the low end of the revenue guidance range, “and noted that if FX remained at current levels, that could provide another ~$80M of tailwind.”

The revenue and EPS estimates for 2016 have been marginally raised.