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eBay: Upbeat Guidance Reinstates Investors’ Confidence

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Jul. 27 2016, Updated 8:04 a.m. ET

eBay raises guidance on the back of strong 2Q16 results

For eBay (EBAY), 2016 is proving to be a strong year. Although the company still lags Amazon (AMZN) in terms of performance, it managed to report two consecutive better-than-expected quarterly results, which reinstated investors’ confidence in the stock.

Moreover, the company’s upbeat guidance further indicates that things are going in the right direction for eBay.

Following its strong 1H16 performance, eBay now expects its fiscal 2016 revenues to be in the range of ~$8.9 billion to ~$9.0 billion, up from its earlier forecasted range of $8.6 billion to $8.8 billion. Adjusted EPS is expected to be in the range of $1.85 to $1.90 per share, up from its earlier forecast of $1.82 to $1.87 a share.

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Guidance

The company noted that the upbeat guidance includes strong revenue performance and a favorable tax rate of 19%–20%. Investment in its products and adverse currency movement is likely to negatively impact the bottom line, as can be seen in the chart above.

Analysts estimate eBay to report earnings of $1.86 per share for fiscal 2016, while its top line is estimated to be ~$8.8 billion. However, considering the company’s healthy performance, we expect an upward revision in estimates for eBay.

What to expect from eBay in 3Q16

For 3Q16, eBay expects its top line to be in the range of $2.16 billion to $2.19 billion. This compares favorably to the analysts’ expectation of $2.14 billion in revenue.

Moreover, the company expects to report adjusted EPS in the range of $0.42–$0.44 per share. Analysts expect eBay to post 3Q16 earnings of $0.44 per share.

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