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eBay Inc. (EBAY 0.01%) 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.
Image source: eBay.
Metric |
Q3 2018 |
Q3 2017 |
Year-Over-Year Growth |
---|---|---|---|
Revenue |
$2.649 billion |
$2.498 billion |
6% |
GAAP net income from continuing operations |
$720 million |
$520 million |
38.5% |
GAAP earnings per diluted share |
$0.73 |
$0.48 |
52.1% |
Data source: eBay.
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.
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.