E-commerce company eBay’s (EBAY) earnings to be released after market close on Weds., Oct. 18. Here’s a look at what might be expected from eBay’s Q3 results.
E-commerce company eBay (EBAY) reports earnings after market close on Wednesday, October 18. So far this year, the stock has had quite a run and is up 26.58% heading into tomorrow’s report. A lot of those gains were in the first half of the year and the stock is only up about 2% since the company’s last earnings release.
As EBAY has announced several initiatives focused on revamping its marketplace, the largest portion of its business, many analysts have increasingly focused on that segment’s gross merchandise volume, or GMV, and revenue in recent quarters.
In the second quarter, EBAY reported that its marketplace GMV, which is the total dollar amount of items sold, grew 6% year-over-year, excluding the impact of foreign exchange rates. That was a slight acceleration from the 4% to 5% year-over-year growth the company has reported since the start of 2016. Revenue from that segment grew 7% year-over-year, also excluding foreign exchange.
The company’s other two segments, StubHub and classifieds, are smaller parts of the business that had been growing at faster rates over the past several years. In the second quarter, EBAY reported that StubHub GMV declined 5% year-over-year and revenue grew 5%, excluding foreign exchange. The decline in GMV was a reversal from the 6% year-over-year growth reported in the first quarter this year. Historically, StubHub has had the highest GMV and revenue in the third and fourth quarters. Second-quarter revenue in the classifieds segment grew 11% year-over-year, excluding foreign exchange.
In addition to GMV and revenue in its marketplace, analysts will likely be interested in any commentary management has on the company’s initiatives focused on improving user experience and recent international advertising campaign. EBAY’s structured data initiative was announced in 2016 and has been focused on making the site’s catalog of items easier to navigate. In June, EBAY rolled out a major advertising campaign in the U.S. and management said it will expand it to key international markets throughout the remainder of the year.
CFRA analysts have said they expect the company’s growth investments to pressure EBITDA margins in 2017, with some recovery in 2018. They also expect the company to continue spending aggressively on mobile capabilities and offerings, international expansion, and new platforms and services.
On top of the company’s growth investments, EBAY has used excess cash to repurchase stock. During the second quarter, the company reported it had repurchased $507 million in shares, and the board of directors authorized an additional $3 billion in repurchases. In the past, management has typically commented on repurchase activity on the earnings call.
FIGURE 1: EBAY THREE MONTH PERFORMANCE.
eBay (EBAY) is up 26.58% year-to-date, but its rally stalled in the third quarter and the stock was up 1.94% over the past three months. The bottom chart shows the stock’s implied volatility. Chart source: thinkorswim® by TD Ameritrade. Data source: Standard & Poor’s. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.
For the third quarter, EBAY is expected to report adjusted earnings of $0.48 per share, up 7% year-over-year, on revenue of $2.37 billion, according to third-party consensus analyst estimates. Revenue is also expected to grow 7% compared to the prior-year quarter.
Options traders have priced in about a 4% potential share price move in either direction around EBAY’s upcoming earnings release, according to the Market Maker Move indicator on the thinkorswim® platform.
In short-term options trading at the October 20 monthly expiration, calls have been the most active at the 38 strike price, pretty much right at the money with where the stock’s been trading the past few days, as well as the 39 strike. Puts have also been the most active at the 38 strike, with a decent amount of activity at the 36.50 and 37 strikes. As of this morning, the implied volatility sits at the 46th percentile.
Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation to sell the underlying security at a predetermined price over a set period of time.
Tomorrow morning, we’ll get a look at housing data when housing starts and building permits for September are released. On the earnings front, several more Dow components take the stage this week. Verizon (VZ) reports before market open on Thursday and both General Electric (GE) and Procter & Gamble (PG) report before market open on Friday. Don’t forget to check out today’s market update if you have time.
Good Trading, JJ @TDAJJKinahan
for thinkMoney ®
Financial Communications Society 2016
for Ticker Tape
Content Marketing Awards 2016
Probability analysis results from the Market Maker
Move indicator are theoretical in nature, not guaranteed, and do not
reflect any degree of certainty of an event occurring.
TD Ameritrade and all third parties mentioned are
separate and unaffiliated companies, and are not responsible for each other's
policies or services.
Inclusion of specific security names in this commentary
does not constitute a recommendation from TD Ameritrade to buy, sell, or
Market volatility, volume, and system availability may
delay account access and trade executions.
Past performance of a security or strategy does not
guarantee future results or success.
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2018 TD Ameritrade.