eBay, Inc. Offers a Sobering Look Ahead

Image source: eBay.

On Wednesday after the market close, eBay (EBAY 0.88%) released its second earnings report since formally separating from PayPal last July. But in stark contrast to last quarter's impressive post-earnings pop, disappointing guidance caused investors to promptly lower their bids for shares of the online auctioneer this time.

That's not to say eBay's actual fourth-quarter results were bad. So before we delve deeper, let's take a look at eBay's headline numbers:

eBay results: The raw numbers

DATA SOURCE: EBAY.

What happened with eBay this quarter?

• These results don't look impressive, but note that revenue was above the midpoint of eBay's guidance for a range of $2.275 billion to $2.325 billion. Adjusted earnings per share also came in above the high end of eBay's outlook of $0.47 to $0.49.
• Excluding the negative effects of foreign currency translation, revenue would have climbed 5%.
• Similarly, gross merchandise volume (GMV) was flat year over year as reported at $21.9 billion, but rose 5% on a currency-neutral basis.
• That included:
• a 1% decline in Marketplaces GMV to $20.7 billion, which resulted in revenue of $1.9 billion.
• a 30% increase in StubHub GMV to roughly $1.2 billion, which resulted in revenue of $232 million.
• eBay's Active Buyer base grew 5% year over year to 162 million.
• Per-share earnings were bolstered by eBay spending $550 million to repurchase 19.9 million shares of common stock. That left around $1.8 billion remaining under its current authorization as of Dec. 31, 2015.
• Generated $1.1 billion in operating cash flow and $1.0 billion in free cash flow from continuing operations.
• Ended the quarter with roughly $8.5 billion in cash, equivalents, and non-equity investments, $6.8 billion in long-term debt.
• Completed the divestiture of its Enterprise business in early November, 2015

What management had to say
eBay CEO Devin Wenig stated:

We delivered solid fourth quarter results and continued to make progress against our key priorities. The quarter also marked the end of an extraordinary year during which we completed the spin-off of PayPal. We continue to grow our business and customer base while executing our plan to reposition eBay for long-term success.

Looking forward 
For the current quarter, eBay expects revenue between $2.05 billion and $2.10 billion, good for continued currency-neutral growth of 3% to 5% over the same year-ago period. First-quarter adjusted earnings per share are expected to be $0.43 to $0.45. Unfortunately, consensus estimates predicted first-quarter revenue of $2.16 billion and adjusted earnings of $0.48 per share.

Finally, for the full-year 2016, eBay anticipates revenue between $8.5 billion and $8.8 billion, or currency-neutral growth of 2% to 5%, and adjusted earnings per diluted share of $1.82 to $1.87. Here again, both ranges were less optimistic than Wall Street's consensus, which called for revenue and adjusted earnings of $8.99 billion and $1.98 per share, respectively.

To eBay's credit, management did note during the call that full-year expectations represent stable growth that's in line with rates discussed previously. In addition, eBay anticipates continuing to repurchase and retire shares throughout the year "at or above the rate of our second-half 2015 repurchases."

But those repurchases are also already incorporated into eBay's underwhelming guidance. And in the end, while it's encouraging to see eBay continues to achieve steady currency-neutral growth as an independent company, it's obvious the market was hoping for even more despite the difficult global economic environment.