eBay (EBAY) Gears Up for Q3 Earnings: What's in the Cards?

eBay EBAY is set to report third-quarter 2020 results on Oct 28. In the last reported quarter, it delivered an earnings surprise of 2.9%.

The company beat the Zacks Consensus Estimate for earnings in all the trailing four quarters, delivering an average surprise of 4.5%.

For the third quarter, the Zacks Consensus Estimate for earnings has remained stable at 86 cents per share over the past 30 days. This indicates growth of 28.4% from the year-ago reported figure.

The consensus mark for revenues is pegged at $2.68 billion, implying growth of 1.24% from the year-ago reported figure.

Let’s see how things have shaped up for this announcement.

eBay Inc. Price and EPS Surprise

eBay Inc. price-eps-surprise | eBay Inc. Quote

Factors to Note

eBay’s solid performance of the Marketplace platform across all major end markets served is expected to have driven the top line in the to-be-reported quarter.

During the quarter, it rolled out more options of managed payment offerings to France, Italy and Spain. This is expected to have bolstered the Marketplace platform.

As revealed during second-quarter 2020 earnings release, managed payments offerings have processed $4.7 billion of gross merchandise volume (GMV) for around 42,000 sellers since its launch.

The latest move bodes well for the company’s growing initiatives toward strengthening the managed payments offerings portfolio and is expected to have helped it in attaining GMV growth. Also, this is in sync with eBay’s deepening focus on scaling managed payments globally.

Its verticals namely Home & Garden, Electronics, Fashion, Auto Parts and Collectibles have been seeing strong demand. The increased demand is being driven by a number of factors like organic traffic, enhanced marketing and higher conversions on its platform.

In addition, eBay’s sales are expected to have improved in the quarter to be reported owing to growth in online consumer spending due to broad-based and increasing social distancing.

Its accelerated Artificial Intelligence efforts through personalization, image search technology and customer support are expected to have enhanced the Marketplace platform.

The company has been providing more data to marketplace sellers, including price and restocking guidance, as well as more insight into inventory such as demand signals for the right products, price, and timing.

These factors are expected to have aided the top line in the to-be-reported quarter.

Core Platform Strength to Drive Net Transaction Revenues

In a bid to increase total net transaction revenues, eBay has been strengthening its core platform and improving user experience.

The company has been accelerating efforts to build product catalogs on structured data, enhance mobile platform, roll out browse-inspired shopping journeys, rejuvenate customer-to-customer business and strengthen its brand. This is likely to have contributed to top-line growth in the third quarter.

Q3 Guidance

For third-quarter 2020, eBay expects net revenues within $2.64-$2.71 billion. The Zacks Consensus Estimate for the same is pegged at $2.68 billion.

Non-GAAP earnings are anticipated in the range of 81-87 cents per share. Notably, the Zacks Consensus Estimate for the same is pegged at 86 cents per share.

Overhangs

Heightening competition in the e-commerce market from companies like Amazon and multichannel retailers might have affected the company’s quarterly performance.

eBay's increased investment in overall platform technology and slower growth rate than peers might have hampered earnings.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for eBay this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here as you will see below.

Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, eBay has a Zacks Rank #3.

Stocks That Warrant a Look

Here are a few stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the quarter to be reported.

Alphabet GOOGL has an Earnings ESP of +7.40% and holds a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

TE Connectivity Ltd. TEL has an Earnings ESP of +5.40% and a Zacks Rank #2.

Netflix, Inc. NFLX has an Earnings ESP of +11.35% and holds a Zacks Rank of 3.

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