Shares of eBay Inc (Nasdaq: EBAY) fell 9 percent on Thursday morning after the e-commerce leader disappointed Wall Street with its full-year earnings guidance on Wednesday afternoon. Analysts say the lower guidance doesn’t bode well for the next two quarters, but EBAY stock remains a solid long-term growth play.
For the second quarter, eBay earnings per share came in at an adjusted level of 53 cents, ahead of consensus analyst estimates of 51 cents. However, revenue of $2.64 billion came up just short of Wall Street expectations of $2.67 billion. Revenue was up just 9 percent from a year ago and only 6 percent when currency exchange rates are factored out.
Gross merchandise volume was up 10 percent to $23.6 billion in the second quarter, and the company said it repurchased roughly $1 billion of EBAY stock. The company said its total active buyers increased 4 percent to 175 million.
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“In Q2 we continued to execute our strategy, making improvements to the core eBay experience,” CEO Devin Wenig says in a statement. “As we look ahead to the second half of 2018, we expect acceleration in our core business and continued strong growth in earnings.”
And yet, the biggest disappointment was eBay’s guidance. The company said it expects third-quarter EPS of between 54 cents and 56 cents and revenue of between $2.64 billion and $2.69 billion. Analysts had expected revenue guidance of $2.73 billion.
For the full year, eBay is calling for EPS of between $2.28 and $2.32 and revenue of between $10.75 billion and $10.85 billion.
Prior to the update, Bank of America analyst Justin Post had been targeting full-year revenue of $10.96 billion.
“While the market may see 4Q guidance risk given year-to-date trends, we note that 6 percent growth in 2018 would be an improvement on a multi-year basis and think eBay continues to have important levers to drive better GMV monetization,” Post says.
He says eBay’s advertising business will be the key catalyst for the stock in the second half of the year.
“While 2018 has been disappointing, the acceleration thesis is now likely washed out of the stock, and we see opportunity for increasing excitement on a potential advertising bump in 2019 (could be over $1 billion in incremental revs over time),” Post says.
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Bank of America has a “buy” rating and $44 price target for EBAY stock.
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EBay Stock Falls on Guidance Miss originally appeared on usnews.com
