eBay Slips 4% As Online Goods Growth Volume Slows

eBay shares fell 4.2% in Wednesday’s extended trading session as 3Q gross merchandise volume (GMV) grew slower than in the previous quarter, raising concerns over the sustainability of online shopping demand boosted by the COVID-19 pandemic. Overall, the e-commerce giant reported stronger-than-expected 3Q results.

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eBay’s (EBAY) GMV, the value of all goods sold on its website, increased 22% in 3Q, down from the 26% growth it had recorded in 2Q. International GMV growth rate also slowed to 16% in 3Q from 22% in 2Q.

Meanwhile, eBay’s 3Q revenues soared 25% to $2.61 billion year-on-year and beat Street estimates of $2.48 billion. The company’s adjusted EPS jumped 60% to $0.85 and surpassed analysts’ expectations of $0.76. (See EBAY stock analysis on TipRanks).

“I’m pleased with the third quarter results,” said eBay’s CEO Jamie Iannone. “On an apples to apples basis, we delivered results that exceeded expectations on both the top and bottom lines. Our third quarter performance reflects the strength of our newly focused strategy coupled with the enormous untapped potential of our marketplace.”

eBay raised its 2020 outlook. The company now anticipates 2020 adjusted EPS between $3.34 and $3.40, up from the previous forecast of $3.04-$3.16. Revenue is expected to be in the range of $10.04-$10.11 billion, up from the earlier projection of $9.59-$9.78 billion. As for 4Q, eBay projects revenues and adjusted EPS in the range of $2.64-$2.71 billion and $0.78-$0.84, respectively.

Following the earnings release, Guggenheim analyst Robert Drbul reiterated a Buy rating and a price target of $70 (31.5% upside potential). In a note to investors, Drbul wrote, “We raise our revenue and EPS estimates for 2020/21 to reflect continued strong Marketplace results and the expansion of managed payments and advertising initiatives.”

Currently, the Street is cautiously optimistic on the stock. The Moderate Buy analyst consensus is based on 12 Buys and 10 Holds. With shares up 47.5% year-to-date, the average price target of $63.50 implies further upside potential of about 19.3% to current levels.