eBay Inc (NASDAQ: EBAY) reports
second-quarter earnings after market close on Thursday, July 20. As more consumers shop online and it faces competition from
Amazon.com, Inc. (NASDAQ: AMZN),
Walmart Stores Inc (NYSE: WMT) and many more,
the company has focused on carving a niche for itself in the ecommerce world with its Marketplace, Stubhub, and Classifieds
segments.
In the last quarter, eBay’s gross merchandise volume (GMV), the total dollar amount of merchandise sold across its marketplaces,
was reported to have increased 2% to $20.9 billion. Excluding the impact of foreign exchange rates, management reported a 5%
increase. GMV is one metric used by ecommerce analysts because these companies ultimately generate revenues through the fees earned
from sales on their platforms.
Another metric for ecommerce companies that is routinely followed by analysts is the number of active buyers a site has. In the
first quarter, eBay reported it had added 2 million active buyers, a 4% increase from the 167 million reported in Q4 2016. CEO
Devin Wenig partially attributed that rise to a “relatively robust consumer-spending environment” on the company’s earnings
conference call.
One factor beyond improved consumer spending that might be helping eBay’s GMV and number of active buyers is its ongoing efforts
to improve its platform. Over the past several quarters, the company has made several changes including a redesign of its
website, and on the back end the company has been focused on what it calls its “structured data initiative”, which is focused on
improving the user experience on its Marketplace platform by making products easier to find.
The company also recently announced a price match guarantee on more than 50,000 items in the United States. eBay said it
“guarantees that an eligible deal will be the best price online, or eBay will match the lower price of a competitor.”
FIGURE 1: EBAY OUTPERFORMING. eBay has been outperforming the broader tech sector since the start of the year. After the
recent tech rally that started at the beginning of July, the stock is up 23.32% year-to-date. Chart source: thinkorswim® by TD Ameritrade. Data
source: Standard & Poor’s. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future
results.
eBay Earnings and Options Trading Activity
For the second quarter, eBay is expected to report earnings of $0.45 per share, up slightly from $0.43 per share in Q2 2016, on
revenue of $2.31 billion, according to third-party consensus analyst estimates. In last quarter’s earnings release, the company
said it expects net revenue between $2.28 billion and $2.32 billion, and earnings per share in the range of $0.43 to $0.45 for the
second quarter.
Options traders have priced in just over a 6% potential share price move in either direction around the earnings release,
according to the Market Maker Move indicator on the thinkorswim® platform. In short-term options trading leading
up to the earnings release at the July 21 monthly expiration, calls have been active at the 36 strike price while puts have been
active at the 35 and 37 strikes. The implied volatility sits at the 69th percentile.
Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over
a set period of time. Put options represent the right, but not the obligation to sell the underlying security at a predetermined
price over a set period of time.
Looking Ahead
Two Dow stalwarts wrap up earnings this week with Microsoft Corporation (NASDAQ: MSFT) reporting after market close on Thursday and General Electric
Company (NYSE: GE) releasing results before market open
on Friday. Next week, Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) kicks off a packed week that includes Twitter Inc (NYSE:
TWTR), Facebook Inc (FB) and Amazon. Make
sure to check out today’s
Market Update to see what else is happening in the markets.
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