eBay Q2 preview: where next for eBay shares?
Joshua Warner August 5, 2021 10:53 AM
eBay delivered its fastest revenue growth in over 15 years during the first quarter of 2021, but can it keep up the momentum as it starts to come up against tougher comparatives from last year when pandemic-induced demand peaked?
When will eBay release its Q2 results?
eBay is scheduled to release its second quarter earnings on Wednesday August 11.
eBay Q2 earnings preview: what to expect rom the results
eBay made a stellar start to the year by reporting a 42% rise in revenue in the first quarter, marking the fastest growth since 2005. That was the result of more people using eBay’s platform to buy and sell goods. The number of sellers increased 8% to 20 million worldwide while the number of buyers increased 7% to 187 million.
However, things are likely to slow as it starts to come up against tougher comparatives. The peak of pandemic-induced demand that erupted last year was in the second quarter of 2020, which will undoubtedly impact growth rates this year.
eBay has said it is expecting revenue to grow by just 4.2% to 5.9% in the second quarter to between $2.98 billion and $3.03 billion from $2.86 billion the year before. Analysts are expecting eBay to hit the midpoint of that range with revenue of $3.00 billion, which would be flat from what was delivered in the first quarter of 2021 as momentum slows.
But, tougher comparatives and higher costs mean Wall Street is expecting earnings to fall. Non-GAAP net income is expected to drop to $654.4 million from $770.0 million the year before while non-GAAP EPS is anticipated falling to $0.95 from $1.08. That would be toward the top-end of eBay’s $0.91 to $0.96 guidance range.
The company’s ongoing efforts to improve its platform and overhaul payments could provide room for eBay surprise in terms of growth. Payments will be closely-watched as eBay is steadily managing more payments that are made through its platform. Over 52% of volumes were processed through managed payments in the first quarter and 4 million sellers had migrated over to the new system, and investors will want to see further improvement made during the second. This is key as it simplifies checkout to encourage more sales and has already cut the number of unpaid items for fixed-price listings by an impressive 80%.
Guidance for the next quarter will also be watched to see how it fares to market expectations, with Wall Street anticipating eBay can swiftly return to growth as the peak in demand during the second quarter eases in the third. Analysts currently expect eBay to report over 11% year-on-year growth in third quarter revenue to $2.89 billion and a 5.8% increase in non-GAAP EPS to $0.90.
eBay shares have surged by almost one-third since the start of 2021, hitting new all-time highs in late July. The 30 brokers that cover the stock currently have an average Buy rating on the stock although the current target price sits at just $70.05 – just 3% higher than the current share price.
Where next for the eBay share price?
The eBay share price has been trending steadily higher since mid-March 2020 before running into resistance at $74 the all-time high last week. The price then fell lower finding support on the 50 dma around $67.
The RSI has fallen into bearish territory and the MACD also supports further downside. Any move lower will need to break through the 50 dma support at $67 and horizontal support at $65, negating the near-term uptrend. A move below $62 the ascending trendline support could see sellers gain traction.
Any rebound could encounter resistance at $70 the round number and previous all time high, before a break back towards $74 and fresh record highs.
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