EBay Inc. dropped 4 percent after the operator of the largest online marketplace issued sales and profit forecasts that fell short of analysts’ estimates ahead of the key holiday shopping season.
The shares fell $2.14 to $51.38 at the close in New York, the biggest percentage drop since July.
“The thing that’s causing us the most angst is what we believe is a dramatically decelerating U.S. e-commerce growth rate from the second quarter,” EBay Chief Financial Officer Bob Swan said on a conference call after results yesterday. “In a relatively short period of time, we’ve seen a pretty rapid deceleration in the market.”
The outlook raises red flags about what is typically EBay’s biggest quarter, when consumers gravitate online to shop for the holidays. U.S. online retail spending growth has slowed, climbing 13 percent in July and August from a year prior, compared with 16 percent in the second quarter, according to ComScore Inc.
Fourth-quarter sales will be $4.5 billion to $4.6 billion, the company said in a statement yesterday. Analysts on average were projecting revenue of $4.64 billion, according to data compiled by Bloomberg. EBay forecast profit excluding some items of 79 cents to 81 cents a share for the period, below analysts’ prediction of 83 cents.
The deceleration in sales may stall a turnaround of the Internet marketplace led by Chief Executive Officer John Donahoe, who has shifted the company from auctions to payments and fixed-price goods.
“We are not expecting any improvement in the fourth quarter from what we experienced over the last eight to 10 weeks,” Swan said of the U.S. e-commerce market. “We have a cautious outlook for the holiday season.”
The company reiterated that it’s predicting 2013 revenue and profit to be at the lower end of full-year guidance as it increases spending on its enterprise business and a PayPal free-shipping promotion.
“Sentiment was already mixed going into the report, but I think the commentary around a deteriorating U.S. environment is apt to make investors more nervous,” said Colin Sebastian, an analyst at Robert W. Baird & Co. in San Francisco.
EBay usually rolls out a round of promotions for the holiday shopping season, working with retailers like Macy’s Inc. to arm store associates with tablets and create kiosks to help consumers navigate stores more quickly and efficiently. EBay faces tough competition from Seattle-based Amazon.com Inc., the world’s largest e-commerce company. Amazon garnered 40 percent of its second-quarter revenue from third-party sellers, its own marketplace that competes directly with EBay.
For the third quarter, revenue rose 14 percent to $3.89 billion from $3.4 billion a year earlier. Net income increased 15 percent to $689 million from $597 million a year earlier.
Revenue in EBay’s marketplaces business, which includes auctions and fixed-price sales, climbed 12 percent to $2.03 billion in the latest quarter.
EBay has shifted focus to mobile, redesigning its mobile site and digital wallet. More than 35 percent of new users in the third quarter came from smartphones or tablets.
The company also expanded partnerships with physical retailers to offer one-hour delivery -- which will also be available in London in 2014 -- and added the ability to order and pay at restaurants through a mobile device.
At online-payments unit PayPal, revenue rose 19 percent to $1.62 billion in the third quarter. PayPal’s take rate, or the commission it takes from each transaction, fell to 3.7 percent in the third quarter from 3.9 percent in the same period last year.
Last month, EBay agreed to buy Braintree, a mobile-payments company that helps startups like room-rental service Airbnb and cab-calling application Uber, for $800 million in cash. Braintree projects payments volume of $12 billion this year, adding to $20 billion PayPal expects to process over the same period.
The deal is EBay’s biggest since March 2011, when it acquired GSI Commerce Inc. for $2.4 billion, a company that hosts retailers’ websites and offers marketing services to customers.
The digital-payments provider also introduced technology in September that lets consumers enter a store and pay without touching a credit card or smartphone. Retailers can plug a new device, called Beacon, into a power outlet and detect phones that have the PayPal application, sending a notification to the cashier.