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eBay Thrives Post PayPal

Posted on Friday, Oct 23rd 2015

Earlier this week, eBay (Nasdaq: EBAY) announced their first ever quarterly results post spinning off PayPal. Any concerns about there being life for eBay after PayPal were put to rest by the announcement of the latest quarterly results, which surpassed market expectations.

eBay’s Financials

eBay’s third quarter revenues fell 2% over the year to $2.1 billion, ahead of the Street’s expectations of $2.09 billion. EPS of $0.43 was also ahead of the market’s forecast of $0.40 for the quarter.

During the quarter, the gross merchandise volume (GMV) of goods sold fell 2% over the year to $19.6 billion. The drop in the GMV was attributed to foreign currency fluctuations. eBay added net 8 million active users to end with 159 million active buyers.

For the current quarter, eBay forecast revenues of $2.28 billion-$2.33 billion with an EPS of $0.47-$0.49. The Street was looking for revenues of $2.33 billion for the quarter with an EPS of $0.48. eBay expects to end the year with a growth of 3%-5% on an FX-Neutral basis and an EPS of $1.80-$1.82.

eBay’s Marketplace Improvements

Of late, eBay has been making several improvements to their marketplace site. Inspired by the success of Amazon’s Prime offering, eBay is now experimenting with a similar service for their users. Currently, they are testing a same day delivery service in Germany under the program eBay+. Consumers who wish to opt for this service will be charged $17-$22 per year. They have also tied up with Argos in the UK to offer same day pick up services to their UK customers. Through their tie-up, goods sold through eBay’s merchants online will be available for customers to pick up immediately at Argos stores. According to a BI Intelligence research report, the US same-day delivery market is projected to grow from $0.10 billion in 2014 to $4.03 billion in 2018, translating to an annual growth rate of 150%. eBay is looking to tap into this high growth market through these innovative services. Despite their measures, eBay will find it difficult to make an impression in the market. Amazon is already a front-runner in the market with Amazon Prime and Google is making their presence felt with Google Express.

Earlier last quarter, eBay also announced the acquisition of Twice, an online consignment store for women’s clothing, for an undisclosed sum. Financial performance for Twice is not known. Prior to the acquisition, they had raised $23 million to set up an online portal to sell used clothes and accessories from leading brands such as Zara, Ann Taylor, and Gap. The company had failed to build a strong customer base and was looking for an acquirer. The acquisition is expected to help eBay expand their Valet offering. eBay Valet is an assisted selling service that allows buyers to use eBay’s services to sell used goods. Currently, eBay’s Valet has nearly 100,000 customers.

eBay’s stock is trading at $27.58 with a market capitalization of $33.6 billion. It touched a 52-week high of $29.35 in July this year.

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