What To Expect From eBay’s Q4 Results

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eBay (NASDAQ:EBAY) is scheduled to report its Q4 results on Wednesday, January 25th. In the fourth quarter, we expect eBay’s active buyers to marginally grow to around 166 million and the company’s gross merchandise value to increase in the low single digits to around $22.0-$22.5 billion. 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.ebay-16We base our estimates on eBay’s consistent positive same-store-sales (SSS) growth for the last six months, owing to growth in eBay Motors (parts and accessories) sales and eBay Fixed-Price sales, which was partially offset by declining marketplace (auctions) sales. ((October 2016 ChannelAdvisor Same Store Sales (SSS), Channeladvisor.com, Nov 3 2016))ebay-19ebay-21Full Year 2016 Expectations

For the full year 2016, eBay expects its revenues to grow 4-5% year over year to $8.95-$9.0 billion, which implies a top line growth rate of 3-4% in the fourth quarter. We expect the company to achieve this target driven by recent initiatives, namely:  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, competition from retailing giants Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT) in the domestic market could limit eBay’s chances of beating its conservative sales growth target. (Also read: Is eBay Losing Its U.S. E-Commerce Footing To Walmart?)

First Nine Months Recap

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In the first nine months of 2016, eBay’s top line grew 5% year-over-year (y-o-y) to about $6.6 billion, driven by strong growth in StubHub and marketing and advertising revenue. Driven by a 25% decline in general and administrative costs, the company’s operating income grew 10% to about $1.7 billion in the first nine months of 2016.
ebay-22Devin N. Wenig, eBay’s President and CEO, stated last year that the company’s strategy was to maintain a low-to-mid single digit top-line growth rate and keep margins and cash flows high. eBay has been able to achieve this target thus far, with its operating margin up 110 basis points and free cash flow up 42% to $1.7 billion in the first three quarters of 2016.

Have more questions about Ebay? Please refer to our complete analysis for Ebay

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