Ebay, Inc. Fell By 20% After The Company Reported Earnings For Q4FY15

The online shopping company has facing immense competition from Amazon and other retailers in the market.

The share price of eBay Inc. fell in the after-market trading on Wednesday since it reported to a flat fourth quarter fiscal year 2015 revenue. The Street had predicted that the company will report revenue of $2.32 billion and so it did – completely aligned with the estimates of the analysts.

Additionally, the online shopping organization was not able to provide an appealing earnings forecast for the upcoming quarter (Q1FY16). According to the estimates of eBay, it will report revenue of somewhere between $2.05 to $2.1 billion. These figures are below the estimates of the analysts who believe it could report revenue of $2.16 billion in the first quarter of the latest fiscal year.

As of January 28, 2016, eBay stock plummets by 20% and was being traded at $23.18 per share. In a time span of six months, the stock has fallen by 5.64%. Despite of the fact that the e-commerce industry is blooming, eBay has not been able to live up to the expectations of the market. Furthermore, the San Jose based organization is predicting earnings per share of 45 cents while the analysts are estimating it be at 48 cents.

Adjusted net income fell by as much as 12% to an amount of $600 million – on a year over year basis it fell by 10% to 0.05, surprising they aligned with the calculations of the analysts. According to the earnings report, there was flat gross merchandise volume – GMV due to the company’s top line which was at $21.9 billion.

However for fiscal year 2016, it is expecting to report revenue generation of $8.5 billion to $8.8 billion along with currency neutral growth of 2% to 5%. Adjusted earnings per share are estimated to be between $1.82 and $1.87 while Wall Street analysts were at least expecting the giant to report EPS of $1.98. Furthermore, they were hopeful that eBay might just post revenue of $8.99 billion for 2016. However, that is yet to find out.

Presently, the biggest competitor in the market is Amazon.com, the retail giant, which has managed to take the bigger piece of the pie. Amazon has provided its customers with Prime Now, faster and free delivery service and many additional options for online shopping. The San Jose, California based retailer is finding it hard to coup with the retail giant’s success.

The entire e-commerce sales grew by as much as 13.6% - making the industry worth $106 billion as of last quarter while the online shopping business managed to have a total value of goods sold on the platform were of $21.9 billion.

Devin Wenig, the chief executive officer of eBay Inc. needs to get his business back on track; mostly it needs to gain back its share of the market from other retail companies. A smartly build marketing strategy to attract merchants and shoppers is highly needed as presently so many alternates/substitutes have come in the market. Customers want a single platform where they can buy and sell product – with a fast delivery system and better experience. 

Goldman Sachs Downgrade EBay Stocks After Valuation

EBay's stocks are no longer in the Conviction Buy list of Goldman Sachs after a poor performance

EBaywas used to be known as one of the biggest online retailers in the United States. But slowly the online auction website started to lose its charm as its rivals, Amazon and Wal-Mart, started to do more business in the market. As of now, EBay stands nowhere near to the likes of Amazon and Wal-Mart and it is trying to do better. Due to all this, it is believed that the company has been removed from the Goldman Sachs’ Conviction Buy list. The investment firm decided to remove on the basis of valuation of the company’s stocks.

Ever since it separated from the 16 years long partner, PayPal, many analysts and professionals thought that the online retailer might not be able to keep up with the fast market trend and immense pressure. But EBay Inc. should be given credit as it has done quite well which no one thought it could do so. However, according to the Goldman Sachs’ valuation, the stocks are not now on the Conviction Buy list. The company also sold its enterprise unit as it spun off its payment subsidiary a few months ago.

According to a source, “The sell-side firm has further made an upside revision in price target from $30 to $33 as it expects the company to adopt a highly focused strategy after its recent spinoff. Analysts at Goldman Sachs believe that the online retailer has significant upside in the coming quarter, mainly due to increased investment in the technology.”

EBay is currently doing well in the market considering the phase it is in but not well if compared to its usual standards. The CEO of the company, Devin Wenig, stated that the company will take some time in order to reposition its business and adjust accordingly to do well in the market. He was recently asked about the company’s performance and EBay stocks performance and he mentioned that the spinning off aftermath is taking a little bit of time but it will soon get back on track.

Mr. Devin Wenig further mentioned and highlighted other services that the company is currently offering such as EBay Plus. EBay Plus was launched as a trial program only in Germany for the time being in order to see the response.

Goldman Sachs has currently downgraded the stocks but has further mentioned that the future is bright for the company in the market. The analysts are confident and have highlighted the attractive risk/reward profile of EBay.