All Eyes On eBay’s Strategic Review, Active Buyer Growth

The big banks have kicked off earnings season. One common theme has been the consumers’ continuance to spend. Across cards, across debits and credit, amid a strong economy, marked by wage growth and low unemployment, it seems the engine that drives the U.S. economy has been purring.

As always, the devil is in the details – and a rising tide does not lift all boats. Yes, folks are spending, but not necessarily at eBay. The fact remains that eBay is projected to see flat revenue momentum year over year, where the consensus is $2.6 billion, but earnings growth is slated to come in at 19 percent to 63 cents a share.

Anemic revenue momentum and lackluster gains amid its all-important seller base (as we will detail in a moment) may mean that for eBay, the song remains the same.

Below the surface of those numbers – among the shorthand data that Wall Street uses to gauge progress – eBay is in the midst of looking at what works within its operational pantheon and what doesn’t.

The moving parts are varied, but taken all together, eBay’s results severely lag in an eCommerce landscape that is growing by double digits. As Chief Executive Devin Wenig stated in a shareholder letter earlier this month, the company has said it will appoint a new board member and review StubHub, its ticketing operation, as well as eBay Classified. There remains, too, some public dissatisfaction from Elliott Management, a significant shareholder. Of course, management will address the progress – or perhaps lack thereof – of strategic reviews on Tuesday’s call.

One recent nod toward a revamp was seen earlier this month, as eBay said it was shuttering its Commerce Network, billed as a platform where companies would advertise products that in turn brought customers to third-party sites. That network will cease operations on May 1.

Recent past may be prologue for Tuesday’s earnings report. Recall that when the company reported fourth-quarter earnings at the end of January, eBay met estimates on the top line and bested results on the bottom line.

Among the themes and data points that surfaced last quarter and will continue to be a staple of discussion and analysis: Active buyers were up 4 percent year on year to 179 million, up a net two million buyers. That mid-single digit rate has been in place for several quarters. International growth, as measured by gross merchandise volume, has been higher internationally than has been seen in the States, and where consolidated growth rates have also been in the mid-single digit percentages.

Notable drags have come from the market services businesses, including the aforementioned StubHub and Classified businesses, where growth year over year was about 1 percent in the fourth quarter, to a bit more than $580 million. StubHub was down slightly, in fact.

One key point of discussion will be payments intermediation, where the company has been busy bringing transactions to completion within the site, a goal for 2020, and where intermediation has been growing quickly. In the fourth quarter (and counting a launch that came at the tail end of the third quarter), that tally was $143 million since launch.

In one bit of very recent news – where management may wind up addressing questions about capital deployment and long-term strategy – the company is reportedly in talks to lead an investment in Paytm Mall, based in India. That investment may span $160 million to $170 million in an effort to branch into offline-to-online commerce in that country. That investment would follow previous stakes in Flipkart (which Walmart assumed when it bought that company) and Snapdeal.