A close look at eBay’s 2014 performance
eBay Inc. (EBAY) released its 4Q14 earnings on January 21, 2015. The company reported a mixed fourth-quarter performance with net revenues increasing 9% year-over-year to $4.9 billion but missing estimates by $10 million. eBay’s GAAP (generally accepted accounting principles) earnings were $936 million or $0.75 per diluted share.
Non-GAAP earnings were $1.1 billion or $0.90 per diluted share, driven by enabled commerce volume growth of 21%. Non-GAAP earnings beat estimates by $0.01. Enabled commerce volume, also called gross merchandise volume (or GMV), is the total volume of goods sold on the eBay website as a whole.
In all, eBay delivered quite mixed results in the fourth quarter amid various challenges and hurdles the company faced in 2014.
eBay and PayPal both generated double-digit customer growth. PayPal reached nearly 162 million active registered accounts, and eBay exceeded 155 million active buyers.
Revenue growth for the quarter was 9% driven by 1% growth from Braintree and offset by 2% due to the negative impact of currency. Braintree is a payment company that supplies technology to process mobile credit card transactions.
eBay delivered revenue near the high end of its own guidance range. This was in spite of the impact of the stronger dollar, which impacted revenue by approximately $30 million since guidance in October.
Non-GAAP EPS (earnings per share) was up 10%, driven by 9% top line growth and lower share count, partially offset by lower operating margins. Operating margins declined due to higher customer service and site operations cost and slightly higher operating expenses.
Flashback to 2014 performance
For full year 2014, eBay enabled $255 billion of commerce volume for merchants and consumers globally, which accelerated by 2% to 24%. PayPal enabled $228 billion of total payments volume (or TPV), up 27%. eBay enabled $83 billion of GMV, up 8%. eBay Enterprise enabled $4.7 billion of gross merchandise services (or GMS), up 13%. Mobile commerce was up 66%.
Revenue for full year 2014 grew 12%, and non-GAAP EPS grew 9%. Through this tough year, the company managed to generate $4.4 billion in free cash flow and reduce outstanding shares by roughly 5%. In the earnings call, Robert H. Swan, eBay’s CFO (chief financial officer), referred to 2014 as “Not the worst performance, but a year we’re glad to have behind us.”
Let’s take a look at eBay’s peers. Amazon (AMZN) announced its 4Q14 results last month. Its revenues missed estimates by $350 million, and EPS beat expectations by $0.18. Alibaba’s (BABA) results also beat EPS by $0.06, but it missed on 4Q14 revenue expectations by $230 million.
These financial results reflect the same trends in the overall e-commerce industry for 2014.
Investors can consider ETFs such as the Dow Jones Internet Index Fund (FDN), which has about 5.3% of its portfolio invested in eBay, and SPDR S&P 500 (SPY), which has about 18% of its portfolio invested in the technology sector.