EBay Projects Holiday Profit That Falls Short of Expectation

Updated on
  • Company reports 168 global users at end of third quarter
  • Expenses increased 8.3% as marketplace tries to build sales

EBay Inc. gave a lackluster profit forecast for the holiday quarter, blunting investor enthusiasm that the online marketplace was solidifying its position in an industry dominated by Amazon.com Inc.

While the company projected sales for the current period that slightly topped analysts’ estimates, shares declined as much as 7.9 percent in extended trading. The stock closed at $37.97 Wednesday in New York and has gained 28 percent this year.

Chief Executive Officer Devin Wenig is trying to speed EBay’s growth to prove that his turnaround strategy is working. The company has increased spending on marketing, redesigned its homepage to personalize products shown to each visitor and is making it easier for shoppers to navigate the site’s 1 billion listings.

“Investors have been looking for sustained momentum in the EBay turnaround story and, given the rather uninspiring results and guidance today, it looks like we may be waiting a little longer,” said Josh Olson, an analyst at Edward Jones & Co.

Adjusted earnings in the current quarter will be 57 cents to 59 cents a share, San Jose, California-based EBay said Wednesday in a statement. Analysts projected 60 cents. Revenue will be $2.58 billion to $2.62 billion compared with analysts’ average estimate of $2.58 billion, according to data compiled by Bloomberg.

“I’d pin it to an expectations-performance mismatch,” James Cakmak, an analyst at Monness Crespi Hardt & Co., said of the share decline after the report.

The company reported its platforms attracted 168 million global active buyers in the period ended Sept. 30, adjusted for the loss of domestic buyers in India after the sale of its business there to Flipkart. Gross merchandise volume, the value of all goods sold, increased 8 percent to $21.7 billion.

EBay’s revenue grew 8.7 percent to $2.41 billion in the third quarter, but operating expenses increased almost as quickly, 8.3 percent, to $1.28 billion.

In June, EBay announced a price-match guarantee on more than 50,000 items to lure bargain hunters to its site. The company is rolling out free three-day shipping on millions of products this year to compete with Amazon’s two-day shipping pledge to subscribers of the $99-a-year Amazon Prime membership. It launched an authentication service in September to boost sales of oft-counterfeited luxury handbags. Earlier this month, EBay introduced a “group listings” feature to consolidate search results into product categories so browsers don’t see the same product listed over and over again.

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