eBay’s Core Marketplaces And Classifieds Businesses Drive Growth

by Trefis Team
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eBay (NASDAQ:EBAY) announced its Q3 2017 results on October 18, reporting 9% growth in net revenues to $2.4 billion. The company’s net transaction revenue was up 8% year-over-year to $1.9 billion, of which StubHub revenue increased by only around 5% y-o-y to $273 million. Comparatively, marketing and advertising revenue was up 12% over the prior year period to $530 million.  Within marketing and advertising, the classifieds business showed strength during the quarter, with 19% y-o-y growth in revenue to $235 million.

The company reported an 8% increase in gross profit for the quarter, due to which the gross profit margin was roughly flat over the prior year period at around 77%. Similarly, eBay’s operating profit for the quarter was also around 8% higher on a y-o-y basis, due to which its operating margin stood at prior year levels of just under 30%.

We have a $33 price estimate for eBay, which is around 10% lower than the current market price.

See our complete analysis for eBay

Key Takeaways

  • Transaction revenues were up 4% on a y-o-y basis to $1.8 billion, with growth primarily coming from eBay’s core Marketplaces segment. Marketplace revenue increased 8% over the prior-year quarter to just over $1.6 billion. Total Marketplace gross merchandise volume (GMV) rose 9% to $20.5 billion, while the aggregate buyer base increased 5% to 168 million active buyers.

  • Comparatively, StubHub revenue was up by only around 5% over the prior year period at $273 million. This has been the fastest growing revenue stream for the company of late, with double digit revenue growth in eight quarters from early 2015 to the March quarter this year. However, eBay reported lower bookings in the June quarter this year, which it attributed to a weaker event landscape and tough competition in the market.
  • Although sales improved in Q3 this year due to early season strength from NHL bookings, the company expects the pressure to continue in the coming quarters. The total GMV for StubHub was up 2% y-o-y to just over $1.2 billion.
  • eBay’s Classified revenue growth surged by 19% y-o-y to $235 million. This came after sales slowed down to mid single digit growth through the first half of the year. A key reason for growth in Q3 was eBay’s motors.de segment in Germany. This segment has growing rapidly, with eBay reporting double digit growth in the Classifieds segment through most of 2016 and 2015.

Q4 2017 and Full Year 2017 Guidance

In the December quarter, eBay expects net revenues of $2.6 billion, representing 8-10% annual growth. It also expects non-GAAP EPS of $0.57 to $0.59 per share, which is in line with consensus estimates. Similarly, eBay expects full year revenues to be around $9.5 billion and a non-GAAP diluted EPS of around $2.00, both in line with the Reuters’ consensus estimates.

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