EBay stock closed trading Wednesday lower after the company gave a forecast for end-of-year sales that was short of expectations.
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In a report released late Tuesday, the e-commerce company reported adjusted earnings of $1.03 per share on $2.5 billion in third-quarter sales. On average, analysts polled by FactSet expected eBay (EBAY) to earn an adjusted $1 per share on $2.5 billion in sales.
During the year-earlier period, eBay earned $1 per share and the company reported $2.4 billion in sales.
While the the San Jose, Calif.-based company’s earnings topped estimates and sales were in-line, guidance for the current quarter missed expectations.
On the stock market today, eBay stock fell 2% to 39.95.
Holiday Sales Outlook Short Of Expectations
For the fourth quarter, eBay expects sales of $2.47 billion to $2.53 billion. Analysts expected $2.6 billion.
Further, the company projects adjusted earnings per share for the fourth quarter of $1 to $1.05. Analysts were looking for $1.04 per share, according to FactSet.
Officials also guided for $17.9 billion to $18.3 billion in gross merchandise volume in the fourth quarter. Expectations from Wall Street called for $18.35 billion.
EBay is under pressure from major retailers such as Amazon (AMZN) and Walmart (WMT) as consumers cut back on spending. Prior to earnings, eBay stock had lost about 2% on the year.
“Inflationary pressures and rising interest rates continue to weigh on consumer confidence and pressure demand for discretionary goods,” said eBay Chief Executive Jamie Iannone on the company’s earnings call. “We’ve observed softening consumer trends to date in Q4, and particular challenges in Europe, suggesting we may see a more muted seasonal uptick over the holidays.”
Fellow e-commerce marketplace Etsy (ETSY) sounded a similar warning last week.
EBay Stock: Gen AI Powers Magical Listings
Iannone said eBay is focusing on what it can control. That includes leveraging generative artificial intelligence to create tools to help sellers and its core enthusiast shopper. For example, eBay in some markets has launched a tool called magical listing that auto-populates sales pages from details in an image.
“Generative AI allows us to leverage our treasure trove of images and listing data to quickly create compelling listings,” Iannone said on the call. “Early users have told us these capabilities will unlock more of the inventory in their closets and garages, which could ultimately keep more products out of landfills.”
Further, eBay has strategized around core focus categories, including luxury handbags and watches and jewelry.
For the third quarter, eBay’s gross merchandise volume increased 2% year over year to $18 billion. That was ahead of the consensus for $17.8 billion.
Ebay also wants to drive more advertising revenue from its platform. Ad sales climbed 24% year over year in the third quarter to $366 million.
EBAY Down 2% On The Year
Evercore ISI maintained an in-line, or neutral, rating for eBay following the report. The firm lowered its target price for eBay stock to 48, from 57. Analyst Mark Mahaney said in Tuesday client note that Evercore is encouraged by eBay’s new initiatives and focus on enthusiast shoppers.
“The key challenge remains—as it has been for years – that it is very unclear whether these new initiatives would be enough to make up for the softness in eBay’s core marketplace business,” Mahaney wrote. “And whether it can recover to consistent growth, given an extremely competitive landscape that includes Amazon, Shopify (SHOP), a series of ‘vertical killers’ like Etsy, and, of course, the surging China retailers (such as Temu and Shein).”
The company has a middling IBD Composite Rating of 65 out of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one. The best growth stocks have a Composite Rating of 90 or better.
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