eBay Inc (NASDAQ: EBAY)
eBay Bid Higher After Earnings Report
eBay reported first quarter earnings today and beat analysts’ expectations driven predominantly by the strength in its PayPal division while the e-commerce unit continues to have difficulties. As the PayPal spinoff is imminent, eBay is striving to reinvigorate the e-commerce offering that originally began the business.
The California based company reported first quarter profits of $626 million, equivalent to $0.51/share, on revenues of $4.45 billion, and profits of $0.77/share. The average expectation on Wall Street was for $.70/share on gross sales of $4.42 billion.
ebay stock is currently trading higher by 5% in the afterhour’s session.
Although eBay’s stock made a significant jump on the announcement of the news, it cannot disguise the fact that year-over-year the company’s revenues and customer spending declined. On a brighter note, the PayPal business revenues increased nearly 14%.
Last year, ebay met a considerable headwind when Google implemented a change in its algorithmic search engine systems that resulted in ebay’s marketplace offerings not showing in primary search results, slashing traffic. Coupled with that, ebay also experienced a security breach which ultimately required each user to reset their password.
In a conference call on Wednesday, Devin Wenig, the incoming CEO for ebay once the split takes place in the third quarter of this year had the following comments, “We still have more work to do,” and “We’re certainly not ready to declare victory over SEO changes and password reset issues.”
CEO John Donahoe said “We had a strong first quarter, with eBay and PayPal off to a good start for the full year. I feel very good about the performance of our teams at eBay and PayPal. Each business is executing well with greater focus and operating discipline as we prepare to separate eBay and PayPal into independent publicly traded companies. We are moving forward with clarity and speed, with a smooth separation expected in the third quarter. We are deeply committed to setting up eBay and PayPal to succeed and to deliver sustainable value to our shareholders.”
Gil Luria, an analyst at Wedbush Securities Inc. said “Without cost cuts, they would have had to take their guidance down at least five cents per share. That’s the major thing driving the stock up, that they were able to keep their guidance for the rest of the year.”
The big glaring question outstanding with eBay is how does the company stand to maintain growth after the spinoff of the payment processing giant PayPal is completed?
Be sure to stay tuned to how eBay plans to address this pressing issue. Until then, eBay may be struggling to attract bids from investors.