Please ensure Javascript is enabled for purposes of website accessibility

eBay Shifts Its Focus to New Customers, Payments, and Advertising

By Steve Symington - Oct 31, 2018 at 3:10PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The online marketplace aims to expand its reach to become a purer play for all things e-commerce.

eBay Inc. (EBAY -2.23%) released strong third-quarter 2018 results on Tuesday after the market closed, including sustained momentum from its core marketplace business, some promising new partnerships, and plans to increase its presence in the payments and advertising spaces.

With shares up nearly 6% in early trading as of this writing, let's take a closer look at how the e-commerce giant started the second half, and what we should expect in the coming months.

Modern eBay front desk with company logo on the wall behind it

Image source: eBay.

eBay results: The raw numbers


Q3 2018

Q3 2017

Year-Over-Year Growth


$2.649 billion

$2.498 billion


GAAP net income from continuing operations

$720 million

$520 million


GAAP earnings per diluted share




Data source: eBay.

What happened with eBay this quarter?

  • Adjusted for unusual items, eBay's non-GAAP net income from continuing operations rose 8% year over year to $554 million, or $0.56 per share.
  • For perspective, revenue was near the low end of eBay's guidance provided in July between $2.64 billion and $2.69 billion. But adjusted earnings were at the high end of guidance for a range of $0.54 to $0.56 per share.
  • Gross merchandise volume (GMV) increased 5% year over year to $22.7 billion. 
  • Active buyers increased 4% year over year across all platforms to 177 million, up from 175 million last quarter.
  • Marketplace platforms revenue grew 6% (5% at constant currency) to $2.1 billion, on a 5% increase in GMV to $21.5 billion.
  • StubHub revenue climbed 7% to $291 million, driven by a 7% increase in GMV to $1.2 billion.
  • Classifieds revenue grew 8% (11% at constant currency) to $254 million.
  • eBay generated operating cash flow of $560 million, and free cash flow of $381 million.
  • eBay began rolling out its new payments experience in the U.S. last month, intermediating $38 million of GMV so far. It also started accepting Apple Pay through the new experience.
  • On the advertising front, eBay expanded its Promoted Listings placements with more than 400,000 sellers promoting over 160 million listings.
  • It struck a new partnership with Square Capital to enable U.S. sellers to access up to $100,000 in funding in as short a time as one day to grow their businesses.
  • eBay completed its previously announced sale of its equity investment in Flipkart for net proceeds of $1.0 billion, ending its strategic relationship with the company.
  • Two weeks ago, eBay announced its intent to acquire U.K.-based classifieds leader for an undisclosed sum.
  • It repurchased 29 million shares for $1 billion this quarter, leaving $4.7 billion remaining under its buyback authorization.

What management had to say

CEO Devin Wenig stated: "This quarter we continued to make foundational investments to improve the long-term competitiveness of our marketplace while setting the stage for significant growth opportunities. We will continue to innovate the customer experience while executing our growth initiatives in Payments and Advertising to position eBay for future success."

Wenig elaborated during the subsequent conference call:

We'll continue to focus on delivering significant product experienced changes for new customers while evolving new experience for our existing base of users at a more measured pace. Similarly, we'll continue to market our brand, but we plan to target our marketing to focus more heavily on acquiring new buyers, while reducing our overall investment. We expect that this will result in slower growth for a period of time as we grow our user base and change the mix of customers. However, this will also allow us to deliver strong earnings growth over this period of time through operational margin expansion and ongoing aggressive capital return, while positioning the business for stronger growth in 2020, as payments and advertising continue to ramp.

Looking ahead

For the fourth quarter of 2018, eBay sees revenue between $2.85 billion and $2.89 billion, good for organic growth of 4% to 5%. Fourth-quarter adjusted earnings should be in the range of $0.67 to $0.69. 

As such, and keeping in mind Wenig's comments on its fundamental business shift above, eBay reduced its full-year outlook to call for 2018 revenue between $10.72 billion and $10.76 billion (down from between $10.75 billion and $10.85 billion before). eBay also narrowed its guidance for 2018 adjusted EPS to be in the range of $2.29 to $2.31 (from $2.28 to $2.32 previously).

In the end, it seems the market is more than willing to accept eBay's decision to accept more modest top-line growth in the near term, especially if it means longer-term growth with a healthier, more profitable business in the meantime.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

eBay Inc. Stock Quote
eBay Inc.
$44.18 (-2.23%) $-1.01
Block, Inc. Stock Quote
Block, Inc.
$75.88 (-9.02%) $-7.52

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.