Ebay Q1 Results Failed to Impress the Market

eBay is busy repositioning itself, but so far it has failed to sustain the enthusiasm of the investors convincing them that its turnaround efforts are working. Its sales growth figures are still lagging behind the e-commerce industry and it is not yet successful in bridging the gap with Amazon, which it is targeting as its biggest competitor.

Devin Wenig, the Chief Executive Officer decided to revamp the entire operations of eBay. His ultimate goal is that eBay should be known for unique items that are not found on Amazon. He started by increasing the spending on the marketing, redesigning the homepage to make it more user-friendly and personalised for the visitors. These efforts did help the company to register a sales gain of 3.7% in the last quarter, but there were doubts of these being actually organic or just a matter of holiday spirits. The market was really interested to know what the company will come up with in its Q1 results.

The company in its Q1 results posted an EPS (Earnings per share) of 49 cents against Wall Street’s forecast of 48 cents. The revenue of the company was also a shade better at $2.2 billion as against the analysts’ expectation of $2.21 billion. The problem is that its operating margins are declining at 24.6 percent annually because of the big spend on marketing and the growing competition in the e-commerce segment.

Weing said in a statement, “The first quarter was a strong start to the year with accelerating growth in active buyers, revenue and our core U.S. business. We are on the right path as we continue to evolve our shopping platform for consumers, leverage our technology advantages and market a sharpened eBay brand globally.”

eBay updated its guidance for the year, but its second-quarter profit guidance fell short of the market expectations. This led to shares losing nearly 4.5% in extended trading hours in New York to close at $33.85. In the past one year, the company shares have gone up by 14%.

An analyst James Cakmak working at Monness Crespi Hardt & Co expresses his views by saying, “While eBay is certainly providing initial signs of a turnaround, we need to see results start to come better than simply par performance. At the end of the day, they are still losing share versus the broader e-commerce market.”

The company succeeded in gaining 2 million active buyers in Q1, which is an increase of 4% from the same quarter a year back. Gross merchandise volume was also up by 2.4 percent to $20.9 billion.

 

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