Friday 24 November 2017

EBay's profit shows there's life after Paypal

EBay's shares were up 8.5pc in after-hours trading
EBay's shares were up 8.5pc in after-hours trading

EBay reported a stronger-than-expected quarterly profit and raised its full-year adjusted profit forecast, helping to allay concerns about the company's prospects following the spinoff of PayPal, its main engine of growth.

EBay, whose shares were up 8.5pc after-hours on Wednesday, faces intensifying competition from rivals such as Amazon as well as from retailers such as Wal-Mart Stores that are boosting their online presence.

PayPal a leader in the fast-growing payment processing market, became a separate company on July 18.

"The worst case scenario kind of came off the table," said Steve Weinstein, a senior analyst at ITG Investment Research.

"I think the Street was preparing for something really bad."

Instead, the company raised its forecast for adjusted profit from continuing operations for the full year to $1.80-$1.82 per share from $1.72-$1.77. Analysts on average were expecting a profit of $1.78 per share, according to Thomson Reuters I/B/E/S.

The increase reflects earnings performance in the second quarter as well as the repurchase of shares and a more favorable tax rate, Chief Financial Officer Scott Schenkel said on a call.

EBay added a net 8 million new active buyers in the three months ended September 30 compared with a year earlier.

But while this was an increase of 5pc, it was a far cry from the double-digit growth rates achieved until about two years ago.

EBay has had to work hard to win back user confidence after a security breach in May last year compromised the data of about 145 million customers.

The company was also hurt by a change in Google's algorithm, which pushed its results lower in search rankings.

EBay's net income fell to $539m, or 45 cents per share, from $67m3, or 54 cents per share, a year earlier.

However, excluding items the company earned 43 cents per share, beating the average estimate of 40 cents.

Net revenue fell to $2.1bn from $2.15bn but was up about 5pc after excluding changes in currency rates. Analysts on average had expected revenue of $2.09bn.

Gross merchandise volume fell 2pc including the effect of currency but grew 6pc on a forex-neutral basis.

"We are not settling comfortably into a 5pc or 6pc growth rate. We are not satisfied with that," a company executive said on the call.

Up to Wednesday's close of $24.21, EBay's shares had fallen about 13pc since July 17. PayPal's shares dropped about 18pc.


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