Earnings: What's Driving eBay's Revenues? It's Online Marketplace, StubHub Or Both?

Does the future of eBay Inc EBAY lie in its efforts to transform itself from a classified-ads platform to an online marketplace or in its ticket reseller subsidiary StubHub?

Both divisions have been growing in the aftermath of EBAY’s spinoff of powerhouse subsidiary PayPal Holdings Inc PYPL, and analysts say they will be looking for more information on how the two are set up for the future when the company reports Q3 results after the bell Wednesday. EBAY reported double-digit revenue gains for StubHub in the previous quarter, as well as its best gain since 2014 in U.S. merchandise volume on the eBay platform. Did that happen again in Q3?

Among the strategic imperatives on the EBAY site that interests some analysts is its structured-data initiative—an effort to better categorize merchandise for a broader reach on search engines. Success in this initiative would speed up user buys and improve the shopping experience, as well as reduce the costs of stepping up traffic to the site. Might better structured data become a bigger revenue driver in 2017?

Those questions and more may be answered when EBAY releases its Q3 earnings after the bell Wednesday and executives speak to analysts on a post-release conference call.

Analysts reporting to Thomson Reuters are pegging year-over-year gains in per-share profit at $0.44, and top-line sales are expected to come in at $2.18 billion.

Though the stock has been in a narrow trading range since late July, except for a brief rally up to a fresh peak in September, volatility appears to be at a high level going into the earnings release. Short-term options traders have priced in a potential 7.5% share price move in either direction around the earnings release, according to the Market Maker Move™ indicator on the thinkorswim® platform from TD Ameritrade.

There has been active buying of both calls and puts at the 32-strike, and also at the 32.5-strike calls and the 30-strike puts. The implied volatility sits at the relatively high 81st percentile. (Please remember past performance is no guarantee of future results.)

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined price over a set period of time.

Probability analysis results from the Market Maker Move indicator are theoretical in nature, not guaranteed, and do not reflect any degree of certainty of an event occurring.
TD Ameritrade and all third parties mentioned are separate and unaffiliated companies, and are not responsible for each other’s policies or services.
Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2016 TD Ameritrade IP Company, Inc. All rights reserved. Used with permission.