What Will Ebay Do To Calm Down Investors?

Photo Credit: Mike Knell/Flickr.com

For the past few years, eBay (Nasdaq: EBAY) has been trying several strategies such as improving customer experience, search features and improving seller capabilities to deal with Amazon’s might. But none of them seem to have worked for it as its growth has continued to slow down. For the recently reported quarter, eBay beat market expectations and even tried to lure the investors with the promise of a dividend. But they aren’t pleased and have initiated activist actions.

eBay’s Financials

eBay recently announced its fourth quarter results which saw revenues grow 6% over the year to $2.88 billion, ahead of the market’s estimates of $2.87 billion. It reported fourth-quarter net income of $763 million, compared with losses of $2.6 billion a year ago. On an adjusted basis, EPS of $0.71 was significantly better than the market’s forecast of $0.56 for the quarter.

During the quarter, eBay’s active buyers grew 4% across its platforms, to end with 179 million global active buyers for the year. Marketplace platforms revenues grew 7% to $2.3 billion with Gross Merchandise Value improving 1% to $23.2 billion. StubHub revenues grew 2% to $314 million with GMV falling 2% to $1.4 billion. Classifieds platforms saw revenues grow 8% to $263 million.

For the first time in 24 years, eBay announced a dividend payout. It is paying a dividend of $0.14 a share. It is also initiating a buy-back of $5 billion worth of stock in this fiscal. It bought back $1.5 billion of its common stock in the recently ended quarter.

eBay ended the year with net revenues of $10.75 billion compared with $9.9 billion recorded a year ago. Net income for the year came in at $2.53 billion compared with a net loss of $1 billion a year ago.

Despite surpassing market expectations for the quarter, eBay’s outlook was disappointing. For the current quarter, eBay forecast revenues of $2.55-$2.6 billion with an adjusted EPS of $0.62-$0.64. It expects to end the year with revenues of $10.7-$10.9 billion and adjusted earnings of $2.62-$2.68 a share. The market was looking for revenues of $2.66 billion for the current quarter with an EPS of $0.61 and revenues of $11.17 billion for the year with an EPS of $2.59 for the year. eBay attributed the lower revenue outlook to a GMV that was shrinking even though its active buyer pool was growing. It said that the decline was a result of the changes they made to the buying process that haven’t scaled well with some of eBay’s product pages driving less website traffic and lower conversion rates. Given that there wasn’t a quick fix to these changes, they expect the pressure to growth to continue into the current year.

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