The Street Weighs eBay's Q2 Earnings, Guidance: What's Next For E-Commerce?

Shares of eBay Inc EBAY opened lower Wednesday despite the auction site reporting a top-and-bottom-line beat in its second quarter.

Here's how some of the Street's top analysts reacted to the print.

The Analysts: Stifel analyst Scott Devitt maintained a Buy rating on eBay with a price target lifted from $66 to $68.

Raymond James analyst Aaron Kessler maintained a Market Perform on eBay. 

Morgan Stanley analyst Brian Nowak maintained an Equal-weight on eBay with a price target lifted from $62 to $64.

UBS analyst Eric Sheridan maintained a Neutral on eBay with a price target lifted from $54 to $57.

Stifel Says eBay A Value Stock After Q2 Beat

The company reported second-quarter results that came in ahead of its own expectations, with GMV growth of 29% besting a guidance range of 23% to 26%, Devitt said in a note.

Total FX-adjusted GMV of $27.1 billion also exceeded the consensus estimate of $26.6 billion. U.S. marketplace GMV was higher by 35% versus expectations of 26%, marking a notable turnaround from down 3.8% last quarter, the analyst said. 

Promoted listings revenue was up 120% year-over-year to $196 million, and classifieds revenue was down by 26% versus management's expectations of down 30% at the high end of its guidance, he said.

During the quarter, eBay added more than 8 million active buyers in the quarter, representing a 5% year-over-year growth rate, Devitt said.

"The current environment provides eBay an attractive opportunity to lean into marketing and technology investments to sustain momentum on the platform coming out of the pandemic," the analyst said.

Related Link: Benchmark Bids Up eBay Price Target Ahead Of Q2 Print

Raymond James On eBay's Guidance, Outlook

The company guided its third-quarter revenue to a range of $2.64 billion to $2.71 billion against a Street estimate of $2.56 billion, and this implies an organic FX neutral growth rate of 14% to 17%, Kessler said in a note.

The company also expects to show a high-teens Marketplace GMV growth rate, followed by a moderation in growth, the analyst said.

For the full year, eBay lifted its revenue guidance from a range of $9.56 billion to $9.76 billion to a range of $10.56 billion to $10.75 billion.

The non-GAAP EPS guidance was also revised higher from a range of $3 to $3.10 to a rang eof $3.47 to $3.59.

Despite an improved outlook, eBay's stock is fairly valued at its levels of around 19 times 2021 estimated GAAP EPS, according to RayJay. 

Morgan Stanley: 4 Key eBay Positives

Tuesday's report and outlook represent a "good temperature check" for where eBay stands in its turnaround and growth initiatives, Nowak said in a note.

The analyst named four key positives from Tuesday's report:

  • GMV was 1% better than expected.
  • Net new buyers improved by 8 million users.
  • EPS of $1.08 was "solid" and shows the company is benefiting from surging demand for e-commerce platforms.
  • Promoted listings ad revenue growth accelerated by 1,300 basis points to 124% year-over-year.

UBS On Negative Takeaways, Open Questions For eBay

Exiting eBay's second-quarter report, there are two key negative takeaways and two questions that management needs to address moving forward, Sheridan said in a note.

The two negatives are:

  • Regions like Germany and Italy showed moderating growth trends after peaking in April, according to eBay. 
  • The company bought back around $33 million worth of shares in the quarter versus expectations of around $170 million.

The two questions that will "likely dictate eBay's path forward" are as follows, according to UBS:

  • What will normalized growth in buyers and GMV look like in a post-COVID-19 universe?
  • How will eBay manage operating expenditures and capital to become a tech-first company while satisfying investor demand for returned capital?

EBAY Price Action: Shares of eBay were trading higher by 0.29% at $54.69 at last check Thursday. 

Related Link: Cramer Grills eBay CEO On M&A, Suggests StockX Acquisition: 'The World's Your Oyster'

Photo by Coolcaesar via Wikimedia

Posted In: Aaron KesslerBrian Nowake-commerceEric SheridanMorgan StanleyRaymond JamesScott DevittStifelUBSAnalyst ColorEarningsNewsGuidancePrice TargetReiterationTop StoriesAnalyst Ratings