Shares of eBay Inc. (EBAY -0.29%) fell 12.1% in October, according to data from S&P Global Market Intelligence, amid concerns for increasing competition and decelerated growth ahead of its third-quarter 2018 report.
To start, eBay shares tumbled 9.7% on Aug. 19 alone, after PayPal (PYPL -0.79%) -- which completed its spinoff from eBay in 2015 -- revealed in its own Q3 results that volume from eBay Marketplaces climbed just 3% year over year on a constant-currency basis. That parked a quick downgrade to "hold" from "buy" from Stifel analyst Scott Devitt, who cited PayPal's disclosure of eBay's "weak [...] gross merchandise volume trends."
EBay shares continued to fall over the next several days, after at least two more analysts weighed in with their concerns.
In particular, on Oct. 22, Bank of America analyst Justin Post downgraded eBay shares to "neutral" from "buy," stating that eBay was potentially on the verge of revealing major cost-cutting or strategic shifts with growing competitive threats. The same day, Monness Crespi Hardt's Jim Chartier offered a similar ratings reduction, signaling pressure at eBay from both the PayPal news and retailers' broader shift to e-commerce platforms.
It turns out these analyst notes weren't far off the mark. When eBay did release third-quarter results on Oct. 30, it revealed a shift in strategy to focus marketing more on acquiring new buyers while reducing overall spending as it fosters its budding payments and advertising platforms.
EBay CEO Devin Wenig added:
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.
Notably, eBay shares jumped nearly 6% the following day as investors breathed a sign of relief. But given Wall Street's words of caution before then, that pop only partially offset eBay's losses last month.