What: Shares of eBay (NASDAQ:EBAY) fell more than 13% early Thursday after the e-commerce giant reported solid fourth-quarter 2015 results, but followed with disappointing guidance.
So what: Quarterly revenue was flat on a year-over-year basis at $2.32 billion, while adjusted net income from continuing operations fell 12% to $600 million. Thanks to stock repurchases over the past year -- including $550 million spent during the quarter to buy back 19.9 million shares -- eBay's adjusted earnings per share fell a more modest 10% year over year to $0.50. Both figures were in line with analysts' consensus expectations.
To be fair, note revenue came in above the midpoint of eBay's guidance for $2.275 billion to $2.235 billion, and adjusted earnings per share were well above the high end of eBay's expected $0.47 to $0.49 range.
Digging deeper, eBay's top line was the result of flat gross merchandise volume (GMV) of $21.9 billion, as reported. On a constant-currency basis, both revenue and GMV would have climbed 5% -- a happy consequence of 5% growth of eBay's active buyer base to 162 million. Within that, Marketplaces GMV declined 1% to $20.7 billion, resulting in revenue of $1.9 billion, while StubHub GMV climbed 30% to $1.2 billion, resulting in revenue of $232 million.
Now what: While the market might have been fine with eBay's fourth-quarter results, it was decidedly less impressed with guidance. For the current quarter, eBay anticipates revenue of $2.05 billion to $2.10 billion, or currency-neutral growth of 3% to 5%, and adjusted earnings per diluted share (from continuing operations) of $0.37 to $0.39. Analysts, on average, were looking for adjusted earnings of $0.48 per share, and revenue of $2.15 billion.
For the full year 2016, eBay expects revenue of $8.5 billion to $8.8 billion, or currency-neutral growth of 2% to 5%, with adjusted earnings per share of $1.82 to $1.87. By contrast, Wall Street was looking for adjusted earnings of $1.98 per share on higher revenue of $8.99 billion.
That's not to say eBay's results were so far off the mark as to merit quite this level of pessimism. And with shares now trading at a mouth-watering 12.5 times trailing-12-month earnings and just 10.2 times next year's estimates, it's not hard to argue that pessimism is fully baked into eBay stock today. Considering eBay continues to expect steady currency-neutral growth from here as it adjusts to being a stand-alone company following its split from PayPal two quarters ago, I think the stock could reward investors willing to take advantage of this pullback.