eBay earnings: A hard bargain
- Q1 revenue: $2.4 billion (-2% YoY, -16% QoQ, vs. $2.38 billion expected)
- Q1 earnings: $485 million (-6% YoY, -11% QoQ, below expectations)
- Q2 guidance: Between $2.38 billion and $2.48 billion in revenue, full-year guidance unchanged.
The big number: Millions are stranded at home, but that doesn't mean they haven't wanted to buy things. eBay narrowly managed to beat analyst expectations for revenue in the quarter, even during the pandemic. That being said, in its last earnings report, the company said it expected to generate between $2.55 billion and $2.60 billion in revenue in Q1, after Q4 revenue came in essentially flat quarter-over-quarter — so business isn't exactly booming. Shares in eBay fell more than 3% on the news in after-hours trading.
People are talking: "Given the uncertainty surrounding the extent and duration of the impact of the COVID-19 pandemic, it is difficult to predict what may result as shelter-in-place guidelines are eased and lifted and how global consumer demand, the effects of COVID-19 on the general economy, seller inventory and advertising spending may evolve over time," the company said in a release.
Opportunities: The majority of eBay's revenue comes from sales on its marketplace sites, and active buyers there grew by 2% in the quarter, to a total of 174 million global active buyers. Hopefully for eBay, more window-shoppers turn into paying customers in the coming quarter.
Threats: Though not its largest business segment, eBay's Classifieds business — which includes local buyer-and-seller exchanges around the world, like Gumtree in the U.K. — is unsurprisingly taking a hit in the time of social distancing. The segment posted revenue of $248 million for the quarter, down 3% quarter-over-quarter, and as long as people are still stuck under quarantine, it doesn't seem like they're going to be wanting to buy and sell things in person anytime soon.
Note that Q1 saw eBay complete the sale of the ticketing company StubHub to Viagogo for $4.1 billion. Windfalls like that don't come along every quarter.The power struggle: Like every other company selling or marketing products during the pandemic, eBay is having to police what people are listing on its site, and has tried to mitigate the fallout of the coming recession on its sellers as much as possible. The company said it has pulled 15 million listings to date that "make false health claims or offer products at inflated prices." It's also deferred fees for hundreds of thousands of sellers to help with their cash flow. They are the backbone of the business, and eBay needs sellers to stay afloat during the pandemic for it to stay in the black.