The Silver Lining In eBay's Earnings? Conversion Rate Improvement

EBay Inc EBAY reported its Q3:16 results, with revenues in line with the estimate and EPS marginally ahead of the estimate and the consensus.

Credit Suisse’s Stephen Ju maintains a Neutral rating on the company with a price target of $34.

Guidance

Management guided to Q4:16 net revenue of $2.36-$2.41 billion, with adjusted EPS of $0.52–$0.54, mostly in line with the consensus expectations.

EBay also raised its full-year revenue and EPS guidance to $8.95–$9.00 billion and $1.85–$1.90, respectively.

During Q3:16, U.S. gross merchandise value decelerated 1 percent sequentially, both with and ex-StubHub, as the company shifted marketing dollars to build brand awareness.

Related Link: StubHub Was A Bright Spot For eBay In Q3

The Silver Lining

Ju believes the silver lining in the results is “the improvement in conversion rate as eBay is able to make use of structured data to make improvements in its listings/landing pages to drive an improved consumer experience.”

However, the analyst also cautioned that there did not appear to be a path for share price appreciation in the near to medium term as investors reset their expectations.

To get more constructive on the stock, Ju would need to see “1) sustained GMV growth acceleration through ongoing conversion rate improvements, 2) take rate improvements via reduced use of contra as well as improvements in promoted listing ads.”

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