eBay’s Strong Earnings Report Surprises Investors

The global e-commerce giant saw its shares rise by the end of the trading day when it released its second-quarter earnings report.

Aug. 5, 2022

eBay (NASDAQ: EBAY) recorded second-quarter revenue of $2.42 billion, which is 2.53% higher than the analyst consensus of $2.36 billion and down by 9% from Q2 2021. Foreign exchange fluctuations are responsible for one-third of the decline in revenue. eBay reported earnings per share of $0.99 or 10.88% higher than the analyst consensus of $0.89.

What were the key points from eBay’s second-quarter earnings report?

The company’s gross merchandise volume (GMV) was $18.5 billion for the quarter, down 18% year-over-year (YoY). However, last year’s figures were affected by mobility restrictions and increased stimulus. GMV is up 5% compared to Q2 2019 and 1.54% compared to the company’s midpoint guidance for the quarter. eBay has set full-year guidance of $72.7 billion to $74.7 billion, down by 17%-15% YoY due to macroeconomic headwinds and foreign exchange fluctuations.

The company generated free cash flow (FCF) of $466 million for the quarter, which represented roughly 19% of the company’s revenue. FCF was down by 49% from the previous year and 15% from the first quarter. The FCF as a percentage of revenue has also been on the decline due to a higher cost of revenue, operating expenses, and a strong dollar. The company’s total cash and investments were $4.5 billion after repaying $605 million in debt during the quarter. This brought eBay’s net debt to $3.2 billion. 

The company returned $1.41 billion to investors in the form of share repurchases and dividends during the quarter. This is up from $1.38 billion in the first quarter of 2022. Over the past year, eBay decreased its diluted share count by 124 million to 561 million shares. The fewer shares there are, the more valuable the remainder becomes while increasing the proportion of dividends the shareholder is entitled to. As of June 30th, eBay had an additional $3.4 billion in share repurchases authorized, which should help ease the decline the company has experienced this year. 

What impact did eBay’s earnings have on its share price?

After the company released its second-quarter earnings report, its share price increased by 4.23% by the end of the trading day. Investors were impressed that it beat the analyst consensus on earnings and revenue. While these figures declined from a year ago, it was not as bad as expected. Investors were also happy because several other retailers (online and physical) reported a miss in earnings. However, the company’s shares have since fallen by 1.16% as macroeconomic concerns weigh on investors.