eBay’s 2Q Earnings Outlook Disappoints After 1Q Beat, Shares Drop 5.4%

Shares of eBay (EBAY) fell 5.4% in pre-market trading on Thursday as the online marketplace forecast earnings for 2Q that came in below analysts’ estimates. eBay expects earnings to land between $0.67 to $0.72 per share in 2Q while analysts had forecast $0.81 per share.

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The company posted a 42% year-on-year rise in revenues to $3 billion in the first quarter, beating analysts’ estimates of $2.97 billion. Non-GAAP diluted EPS of $1.09 per share came in ahead of consensus estimates of $1.07 per share.

eBay’s CEO, Jamie Iannone said, “We delivered another strong quarter for the company and an excellent start to the year for our buyers and sellers. We generated tremendous volume and earnings, with revenue growth the highest it has been since 2005. Last July, I laid out our vision for a Tech-led reimagination of eBay and our results prove this long-term strategy is working.”

eBay scaled up its global management of payments during the quarter with managed payments processing over 52% of global on-platform volume. At the end of 1Q, over 4 million sellers globally had migrated to eBay’s managed payments services. eBay reported gross merchandise volume (GMV) of $27.5 billion in 1Q, up 29% year-on-year.

For the second quarter, eBay expects revenues of between $2.98 billion and $3.03 billion. The company has also declared a cash dividend of $0.18 per share payable on June 18 to shareholders of record as of June 1. (See eBay stock analysis on TipRanks)

Following the 1Q earnings, Guggenheim analyst Robert Drbul lowered the price target from $75 to $70 and reiterated a Buy on the stock. Drbul commented on the earnings, “While the company will be facing tougher comparisons in the quarters ahead (we modestly lower our 2021 Marketplace GMV and EPS estimates as such), we continue to believe EBAY shares offer an attractive risk/reward at today’s levels.”

“In our view, we continue to be encouraged by increased interest and relevancy around the eBay platform (active buyers up +7% in 1Q), in part led by the continued significant growth in sneaker and trading card popularity, along with continued heavy investment in marketing and product development which should support sustained relevancy in coming periods,” Drbul added.

Overall, consensus on the Street is that EBAY is a Moderate Buy based on 8 Buys and 13 Holds. The average analyst price target of $70.12 implies upside potential of about 12.5% from current levels.