Wall Street's expectations are high for eBay (NASDAQ:EBAY) as it awaits the release of the tech industry veteran's earnings report on Wednesday. The company is still losing market share to fully-integrated rivals like Amazon and Walmart. However, its growth trends are stabilizing, which has contributed to this online marketplace's solid earnings growth.

Shareholders are also excited about the potential for increased profitability and surging cash returns as eBay shifts its business model and refocuses on its core marketplace segment.

A customer places an online order

Image source: Getty Images.

With those big-picture trends in mind, let's take a look at the key metrics investors should be watching when eBay announces its third-quarter results.

Growth highlights

The consensus expectation among analysts is for flat sales of roughly $2.65 billion. Yet, because eBay does so much business in international markets, the more informative growth metrics will be changes in the buyer pool and gross merchandise volume, or GMV.

The company's pool of buyers has been growing at 4% for more than a year, compared to 5% in late 2017 -- look for that figure to stay steady this week. The e-commerce giant's strategy has been to focus on squeezing as much engagement as possible out of its current user base rather than spending heavily on marketing to acquire new buyers.

As for GMV, look for similarly sluggish results. eBay has seen approximately zero growth in this core metric for each of the last three quarters, mainly thanks to sinking volumes in the U.S. market. Executives suggested back in July that this segment will remain under pressure through the end of the year at best, in part because a rapidly growing number of states are enacting legislation that requires online marketplaces to collect sales tax. This effectively raises prices for eBay's customers, making its marketplace a bit less competitive.

On the bright side, eBay should reveal positive results in its two new growth lines: third-party advertising and payments processing. These segments aren't yet large enough to move the needle, but with the ad business scaling up toward $1 billion in annual sales, it might not be long before they become material growth contributors.

Capital plans

Back in July, management offered no updates on the results of their strategic review or their exploration of divesting the StubHub and eBay classifieds businesses. Investors will be hoping for news on those fronts Wednesday.

There are multiple directions that management could take, including spinoffs or the outright sale of the non-marketplace divisions. Cash raised from such divestments could go toward buying back stock or raising eBay's recently initiated dividend. Or management could decide to keep all its business lines together.

Since July, eBay announced the departure of its CEO Devin Wenig and the appointments of an interim leader and an interim CFO. With temporary figures in those top jobs, the company might be inclined to make less aggressive strategic changes for now.


When eBay updates investors on its 2019 outlook, it will also make its first official comments about fiscal 2020. The 2019 prediction is for revenue between $10.75 and $10.83 billion, which would represent year over year growth of just 1% at the top of the range (but 2% to 3% growth on a currency-neutral basis).

Modest profitability increases will lift non-GAAP earnings per share to between $2.70 and $2.75. More importantly, their longer-term outlook will show whether executives foresee a quick rebound in 2020 toward the 6% growth that the company delivered in 2018, or if instead, they're anticipating a third straight year of slowing sales gains.

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