eBay Inc. EBAY is scheduled to report fourth-quarter 2017 earnings on Jan 31, after the bell.
We expect eBay to perform well driven by strength in its marketplaces active users and net transaction revenues.
Shares of eBay have gained 27.1% in the past 12 months, significantly underperforming the industry's 68.1% rally.
Marketplaces Active Buyers to Drive Growth
In the third quarter, eBay’s marketplaces active buyers increased 5% from the year-ago period, taking the total to 168 million. We expect significant additions in the to-be-reported quarter. The Zacks Consensus Estimate for this metric is currently pegged at 170 million.
eBay accelerated its partnership deals to boost its marketplace. The company also entered into a partnership with Spring to offer a wide range of apparel and accessories through ebay.com. The company is anticipated to benefit from added selection of luxury brands.
Moreover, the company is offering daily deals on Facebook's FB Mobile Marketplace and getting access to the latter's huge user base in return.
Core Platform Strength to Drive Net Transaction Revenues
In the third quarter, eBay's total net transaction revenues were $1.88 billion. The figure is expected to increase in the to-be-reported quarter as eBay has been strengthening its core platform and improving user experience.
The company accelerated its efforts by building product catalogs on structured data, enhancing mobile platform, rolling out new browse-inspired shopping journeys, rejuvenating customer-to-customer (C2C) business and strengthening its brand.
The Zacks Consensus Estimate for net transaction revenues are currently pegged at $2.1 billion.
Overhangs Remain
Concerns remain in the form of increasing competition in the e-commerce and hardline retail market from companies like Amazon.com Inc. AMZN and Wal-Mart WMT and deceleration of growth in the e-commerce market both domestically and internationally.
eBay's increased investment toward overall platform technology and slower growth rate compared to its peers are also overhangs. Moreover, eBay's growth continues to suffer due to a weak world economy. The company is heavily dependent on countries outside the United States for its transaction and Internet sales. Although the United States is flourishing, emerging economies are slowing down.
What Our Model Says
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.
eBayhas a Zacks Rank #5 (Strong Sell) and an Earnings ESP of +0.28%, which does not indicate a likely positive surprise. You can see the complete list of today’s Zacks #1 Rank stocks here.
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