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The online marketplace missed on revenue to end the first half and reduced its full-year outlook. Here's what investors need to know.
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eBay Inc. (EBAY 0.02%) announced mixed second-quarter 2018 results on Wednesday after the market closed, detailing lighter-than-expected revenue growth and solid profitability as the online marketplace works to expand its reach. But eBay also offered light guidance for the current quarter and reduced its full-year revenue outlook.
Let's dig deeper to better understand what eBay accomplished over the past few months, and what investors should be watching as we look ahead.
Image source: eBay.
| Metric |
Q2 2018 |
Q2 2017 |
Year-Over-Year Growth |
|---|---|---|---|
|
Revenue |
$2.64 billion |
$2.419 billion |
9.1% |
|
GAAP net income from continuing operations |
$638 million |
$29 million |
2100% |
|
GAAP earnings per diluted share |
$0.64 |
$0.03 |
2033% |
Data source: eBay. GAAP = Generally accepted accounting principles.
Ebay CEO Devin Wenig stated:
In Q2 we continued to execute our strategy, making improvements to the core eBay experience. At the same time, we pursued significant opportunities in advertising and payments. As we look ahead to the second half of 2018, we expect acceleration in our core business and continued strong growth in earnings.
But eBay's outlook wasn't quite so optimistic from investors' points of view. For the third quarter of 2018, eBay anticipates revenue between $2.64 billion and $2.69 billion, for organic currency-neutral growth of 5% to 7%. On the bottom line, that should result in adjusted earnings from continuing operations in the range of $0.54 to $0.56 per share. By comparison -- and though we don't usually lend much credence to Wall Street's demands -- most investors were looking for earnings near the high end of that range on revenue of $2.73 billion.
Looking to the full year, eBay also reduced its revenue guidance to call for 2018 revenue between $10.75 billion and $10.85 billion, down from $10.9 billion to $11.1 billion previously. But eBay also modestly increased its outlook for 2018 adjusted earnings per share to be in the range of $2.28 to $2.32, compared to $2.25 to $2.30 per share previously.
During the subsequent conference call, management explained that the reductions largely stem from the negative impact of the strengthening U.S. dollar, particularly with almost 60% of eBay's business coming from international markets. In addition, and to a lesser extent, eBay is not assuming improvement in the trajectory of StubHub's markets in the second half.
That's not to say this quarter was terrible. eBay did, after all, move forward with its primary strategic directives in improving its customer experience and steadily growing its active user base.