eBay Sustains Growth Across Segments, Robust Guidance For Q1

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eBay (NASDAQ:EBAY) announced its fourth quarter results on Wednesday, January 31, reporting a 9% increase in net revenue to $2.6 billion. Growth came from both the transaction and marketing services businesses. Similar to the September quarter, the highest growing revenue stream was classifieds with 20% y-o-y growth in revenues in the two most recent quarters. The other positive for eBay was StubHub revenues growing in double digits after a slowdown in Q2 and Q3 owing to a weaker event landscape.

We have a $34 price estimate for eBay, which is around 15% lower than the current market price. eBay’s stock price has fluctuated between $30 and $40 in the last year. We have created an interactive analysis where we have summarized Q4’17 and full year results. You can change expected revenue and income margin figures for Q1’18 to gauge how it will impact expected EPS for the March quarter.

See our complete analysis for eBay

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Highlights From Q4

eBay’s net transaction revenue was up 8.5% year-over-year to just over $2 billion, of which StubHub revenue increased 12% y-o-y to $306 million. StubHub’s growth was a result of a 16% increase in StubHub gross merchandise volume (GMV) to $1.4 billion, driven by robust demand for concerts complemented by MLB playoffs and college football through the quarter. StubHub’s online ticketing business is expected to continue to drive growth at mid to high single digits through 2018.

Comparatively, eBay’s core marketplaces transaction segment revenue increased 8% y-o-y to $1.7 billion. Through the first half of 2017, the total marketplace GMV rose by low single digits. However, growth accelerated in the second half of the year to a 9-10% annual increase in GMV. eBay’s marketplaces GMV stood at $23 billion in Q4 and $84 billion for the full year.

Similarly, Marketplaces marketing and advertising revenue was up 6% over the prior year period to $330 million – a trend consistent in recent quarters. On the other hand, the Classifieds business has shown strength in recent quarters. Growth picked up in Q3 after a slow start to the year for Classifieds. A key reason for growth in Q3 was eBay’s motors.de segment in Germany. Classified revenue through Q4 was up 21% to $244 million. Management expects double digit growth to continue through 2018.

Despite revenue growth in recent quarters, eBay has been grappling with falling operating margins. An increase in marketing and product development costs has led to some margin compression. eBay’s non-GAAP operating margin was down by a percentage point in Q4 and for the full year to 30.9% and 9.5%, respectively.

March Quarter Guidance

In the March quarter, eBay expects net revenues of $2.6 billion, representing a strong 17% annual increase. It also expects non-GAAP operating margin in the 28% range through 2018. Expected non-GAAP EPS of around $0.53 represents an 8% increase on a y-o-y basis and is in line with consensus estimates.

 

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