eBay’s Q3 Results As Expected, But Stock Stumbles On Bleak Q4 Guidance

eBay (NASDAQ:EBAY) released its Q3 results yesterday and they were largely in line with market expectations. The e-retailer’s revenue grew 6% year over year to $2.2 billion during the quarter, which beat the Reuters consensus estimate by over $70 million. The company’s earnings of $0.36 per share were down 20% year over year, but were in line with analyst consensus estimates of $0.35-$0.37.

Top line growth was driven by a 5% increase in Marketplace sales and 7% increase in Marketing & Advertising revenue over the prior year quarter. This was the the third consecutive quarter of sales growth for eBay and was driven by:  1) structuring data into catalogs (for search engine optimization); 2) diversifying traffic sources; 3) enhancing the seller experience; and, 4) trimming down the asset portfolio. However, this increase was offset by a 15% increase in cost of revenues, which led to a 6% decline in operating income to $542 million in the quarter. 

eBay repurchased $500 million worth of its own shares in the quarter, and has approved an additional $2.3 billion worth of share repurchases going forward. Notwithstanding its expected third quarter results, eBay’s stock fell over 8% in after-hours trading because of its slightly weak guidance for the holiday season fourth quarter. In the fourth quarter, the company expects revenue between $2.36 billion and $2.41 billion, against consensus estimates of $2.40 billion. It also expects non-GAAP EPS of $0.52 to $0.54 per share, against consensus estimates of $0.54.

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