Last year was a tough one for eBay (NASDAQ:EBAY) investors. The e-commerce platform lost a quarter of its value as the broader digital shopping market grew up around it, dwarfed by the success of major players like Amazon. In the wake of these events, eBay has worked to remake itself, targeting more of a niche market.

Investor enthusiasm coupled with recent events have pushed eBay's stock up more than 16% in recent weeks, putting pressure on the company to continue to deliver.

eBay is scheduled to release the financial results of its just-completed fourth quarter after the market close on Tuesday, Jan. 29. Let's take a look at the company's third-quarter earnings, a news flash, and eBay's outlook to see what insight they provide into the company's upcoming earnings report.

A building entrance adorned with the eBay logo.

Image source: eBay.

A look back

In the third quarter, eBay generated revenue of $2.65 billion, an increase of 6% year over year, falling at the low end of the company's guidance and just missing analyst consensus estimates of $2.66 billion. Diluted earnings per share of $0.73 climbed 52% compared to the prior-year quarter. Adjusted earnings per share jumped 19% year over year to $0.56, at the high end of management's forecast and edging past expectations of $0.55 per share.

eBay reported that global active buyers grew to 177 million, up 4% compared to the prior-year quarter. Marketplace revenue of $2.1 billion climbed 6%, while StubHub revenue of $291 million increased 7%, both year over year. Gross merchandise volume (GMV) for marketplace and StubHub grew to $21.5 billion and $1.2 billion, respectively. Total GMV of $22.7 billion grew 5% year over year. eBay's classified ads business added revenue of $254 million, up 8% year over year.

Current events

Activist investment firm Elliot Management released an open letter to eBay's management, after disclosing a 4% stake in the online marketplace, making it one of the company's largest investors. The letter said Elliot's $1.4 billion investment in the company "demonstrates our strong belief in the value opportunity at eBay." Elliot's team pointed out that the stock had underperformed its peers, and laid out a number of steps it believes eBay must take to unlock that value. 

These steps include revitalizing the company's core marketplace, spinning off StubHub and eBay's classifieds business, instituting operational improvements, implementing a 1.5% dividend yield, and accelerating its stock buybacks. The hedge fund believes if eBay were to implement these steps, it would nearly double eBay's stock price to $63 per share within two years.

eBay has said it's reviewing Elliot's proposals.

What the quarter may hold

For the upcoming fourth quarter, eBay is guiding for net revenue in a range of $2.85 billion to $2.89 billion, representing year-over-year growth of between 4% and 5%, excluding the impact of foreign currency changes. The company is also expecting diluted earnings per share (EPS) of between $0.87 and $0.92, and adjusted earnings per share in a range of $0.67 and $0.69.

To put this into the context of investor expectations and the broader market sentiment, analysts' consensus estimates are calling for revenue of $2.87 billion, in line with management's guidance, and adjusted EPS of $0.68, at the high end of eBay's forecast range.

It's important to note the high expectations that are already built into eBay's stock, especially in the wake of Elliot Management's letter. As of this writing, eBay's shares have rallied more than 16% in 2019, an indication that investors are expecting eBay to deliver the goods. If its results fall short, the stock will likely resume the downward trend it maintained in 2018. We'll know much more when the company reports after the market closes on Tuesday, Jan. 29.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends eBay. The Motley Fool has a disclosure policy.