eBay's (EBAY) Anemic Growth Isn't Appealing - Evercore ISI
Evercore ISI analyst, Ken Sena, wouldn't recommend eBay (NASDAQ: EBAY) despite maintaining estimates that are higher than consensus. The growth of 2-5% (up from 0-5%) is just not appealing enough where competitors such as Google and FB are making investments in product ads, customer match, and local targeting for the sake of higher seller conversion. No change to Hold rating but the price target drops to $26 from $29.
GMV of $22b (0.3% y/y and 5% y/y x-FX) was 1% below expectations. However, the new disclosures on StubHub GMV showed StubHub driving total GMV’s growth at 30% y/y ($1.2b), which benefited from a reversal on ticket-fee disclosures made in the prior year. Meanwhile, Transaction Revenues of $1.8b (-1% y/y and 5% y/y x-FX) were 2% below their estimate despite receiving a similar StubHub boost given its growth and higher take-rate (20% vs. Marketplace’s 7.7%).
With eBay now requiring sellers to include listing data such as brand, manufacturer part number (MPN), and GTIN (a separate unique product code such as a UPC or ISBN), management offered an update on their progress on this front, indicating that their new structured data initiative now covers 18 categories, or ~38% of relevant listings, but not very different than the prior quarter (or 30-35%). Moreover, as eBay works towards providing a “grouping and merchandising” layer within Search, the analyst tends to see the benefit accruing more to Search than eBay over time, even if early integrations have signaled some lift.
The high end of the operating margin guide dropped 200bps leaving guidance at 31% - 33% (from 31% - 35%). Management cited a strengthening dollar and separation costs as the primary driver of the lowered guidance.
Cutting FY16 revenue estimates 4.7% to $8.7b and our 2016 Adj. Operating margins 270 bps to 32% of revenues, or $2.7b (-7% y/y). Adjusted EPS falls 15% to $1.88, just above the high-end of the $1.82-$1.87 range.
For an analyst ratings summary and ratings history on eBay click here. For more ratings news on eBay click here.
Shares of eBay closed at $26.42 yesterday.