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Must-know: Why PayPal is driving eBay's mobile growth

Part 6
Must-know: Why PayPal is driving eBay's mobile growth (Part 6 of 7)

Why eBay lowered its guidance for its full year of 2014

Unexpected issues impacted eBay’s performance in the last quarter

eBay (EBAY) faced a lot of unexpected issues in the last quarter. It suffered from a cyberattack that impacted 145 million eBay user accounts. Due to the cyberattack, not only did eBay see the user activity decline, but it also saw its Google (GOOGL) search ranking fall during the quarter. Then came the sudden exit of David Marcus, the former president of eBay’s fast-growing unit—PayPal. Marcus left eBay to join Facebook (FB), creating further problems for eBay. All of these issues impacted eBay’s revenue and operating margins in the last quarter.

eBay full year guidanceEnlarge Graph

eBay lowered its revenue guidance for the full year of 2014

During the conference call to announce earnings, eBay’s management mentioned that its focus now would be on recovery. So eBay’s now lowering its high-end full-year revenue guidance by $200 million, from $18.5 billion to $18.3 billion, as shown in the chart above. But it’s maintaining its full year non-GAAP earnings per share (or EPS) guidance of $2.95 to $3 per share. eBay mentioned that PayPal’s strong operating leverage would help offset the impact of slower revenue growth.

eBay needs strong revenue growth to compete in e-commerce space

The e-commerce market has huge growth potential. According to a report from eMarketer, the worldwide business to consumer (or B2C) e-commerce market could grow from $1.23 trillion in 2013 to $1.47 trillion in 2014 at a growth rate of 19%. eBay’s Marketplaces’ revenue grew by a disappointing 8% in the last quarter over the corresponding quarter a year ago. So the company has underperformed compared to the broader market. But Amazon’s (AMZN) revenue grew 23% in the last quarter.

eBay needs strong revenue growth in the coming quarters to make up for the slow growth in the first half of this year. This is also important for exchange-traded funds (or ETFs) like the First Trust DJ Internet Index Fund (FDN), which has decent exposure to eBay.

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