EBay drops on economic 'headwinds' in Europe, South Korea
EBay reported solid second-quarter results on Wednesday but Chief Executive John Donahoe warned of economic “headwinds” in the second half of the year from Europe and South Korea.
Chief Financial Officer Bob Swan told analysts that eBay’s full-year results will come in at the low end of the company’s forecast range, helping to send shares of the e-commerce giant down more than 5 per cent in after-hours trading.
“It’s not a quarter in which they absolutely crushed it,” said Ron Josey, an analyst at JMP Securities. “They are doing well, but people were hoping for more.”
Second-quarter net income was US$822 million (HK$6.4 billion), or 63 cents a share, versus US$730 million, or 56 cents a share, in the same period a year earlier. Revenue rose 14 per cent to US$3.88 billion. EBay was expected to earn 63 cents a share on revenue of US$3.89 billion, according to Thomson Reuters I/B/E/S.
“Macroeconomic headwinds in Europe and Korea will continue to be a challenge in the second half of the year,” Donahoe said. “But our core businesses are strong.”
EBay lagged rival Amazon.com Inc for several years, but Donahoe has led a turnaround that focuses on mobile shoppers, international expansion and tie-ups with local physical stores. EBay is spending heavily on these initiatives, and hopes they will fuel growth in coming years.
EBay’s third-quarter forecasts for profit of 61 to 63 cents a share on revenue of US$3.85 billion to US$3.95 billion were weaker than expected. The company stuck to its full-year guidance which calls for earnings of US$2.70 to US$2.75 a share on revenue of US$16 billion to US$16.5 billion.
But CFO Swan said results will likely come in at the low end of those ranges, with “modest” revenue acceleration from the first half of the year to the second.
Wall Street has been worried about the second half of this year.
“This puts a lot of pressure on eBay’s fourth quarter, which has to be good for the company to meet its full-year forecasts,” Josey said.
EBay shares fell 6 per cent to US$53.94 in after-hours trading on Wednesday.
E-COMMERCE GROWTH SLOWS
EBay and Amazon have cited Europe’s weak economy as a drag during this year’s first quarter. The situation did not improve in the second quarter, according to eBay executives. Amazon, the world’s largest Internet retailer, reports second-quarter results next week.
Last year, when Europe’s economy weakened, e-commerce growth rates stayed above 10 per cent as consumers looked to stretch their money by searching online for cheaper prices, Donahoe told Reuters in an interview on Wednesday.
In this year, as Europe’s economy enters a second difficult year, disposable incomes have been hit so much that even e-commerce has been dented, with growth rates in the single digits now, Donahoe said.
In South Korea e-commerce growth rates are falling to about 4 per cent this year from 9 or 10 per cent last year, he added.
Still, eBay’s Marketplaces business performed better in the United States and PayPal is still growing quickly.
EBay reported second-quarter gross merchandise volume, or GMV, of US$7.3 billion in the United States, excluding auto sales. That was up 16 per cent from the same period a year earlier.
Doug Anmuth, an analyst at J.P. Morgan, was expecting US GMV of US$7.27 billion in the latest period.
PayPal, eBay’s online payments division, reported total payments volume, or TPV, of US$43 billion in the second quarter, up 24 per cent from a year ago.
PayPal takes a small cut of each transaction, so this is a closely watched number on Wall Street. Anmuth was expecting TPV of US$42.54 billion in the latest period.
The volume of transactions PayPal processed for merchants off eBay.com, a business known as Merchant Services, jumped 29 per cent in the second quarter. That was the fastest growth since 2011, according to Gil Luria, an analyst at Wedbush Securities.
“The main concern going into the quarter was a slowdown at PayPal, so these numbers are encouraging,” Luria said.