Should You Buy eBay Stock before Its Earnings Report?



eBay (NASDAQ:EBAY) plans to report its second-quarter earnings on July 28 after the market close. The company will be the first among the major US e-commerce companies to report earnings this season. For example, Shopify (NYSE:SHOP) plans to report its earnings on July 29. Amazon.com (NASDAQ:AMZN) plans to report its earnings on July 30, while Etsy (NASDAQ:ETSY) will likely release its earnings report on August 5.

What to expect from eBay’s earnings

eBay reported its first-quarter earnings on April 29. The company delivered an adjusted EPS of $0.77, which rose from $0.65 in the first quarter of 2019 and beat the consensus estimate at $0.71. eBay’s revenue of $2.37 billion declined 2.0% year-over-year but still beat the consensus estimate by about $60 million.

For eBay’s upcoming earnings report, the internal outlook shows an adjusted EPS of $0.73–$0.80. The internal projections call for revenue of $2.38 billion–$2.48 billion, which suggests growth of 2%–6%.

On Wall Street, analysts expect eBay’s coming earnings report to deliver an adjusted EPS of $1.02 on revenue of $2.79 billion. In the second quarter of 2019, eBay delivered an adjusted EPS of $0.68, which beat the consensus estimate at $0.62. The company’s revenue of $2.69 billion rose 2.0% year-over-year and beat the consensus estimate by about $14 million.

eBay focuses on the marketplace business

Notably, eBay gears up to report earnings just after it has struck a deal to sell its eBay Classifieds unit. The company will sell the classifieds business to Adevinta for $9.2 billion. Several potential buyers, including Prosus and a group led by Blackstone, are lined up for the classifieds business.

The eBay Classifieds sales deal involves cash and stock. The cash component of the deal is $2.5 billion. For the remaining compensation, eBay will receive 540 million Adevinta shares, which translates into a 44% equity stake in Adevinta. The deal with Adevinta lets eBay keep a stake in the classifieds business after selling it.

Selling the Classifieds business allows eBay to focus on its core marketplace business. Previously, the company sold its online ticketing unit StubHub.

Investing in eBay stock

eBay prepares to report its earnings at a time when its stock has been on fire. At $56 per share, eBay stock has climbed 56% in 2020. However, the company has more room to run. Investors scooping up eBay shares now will get them at nearly an 8% discount to their 52-week high of $61. Currently, eBay shares trade at nearly a 38% discount to the peak target price of $77.

Analysts are bullish on eBay stock before the earnings report. On Wednesday, BMO Capital analyst Daniel Salmon lifted the target price on eBay stock to $59 from $52. On the same day, Wedbush analyst Ygal Arounian hiked its target price to $65 from $58. The analyst thinks that eBay’s upcoming earnings results will beat the forecasts. KeyBanc analyst Edward Yruma lifted its target price on eBay stock to $65 from $58.

Unlike Amazon and many other e-commerce companies, eBay pays dividends to its shareholders. The company rewards shareholders with stock repurchases. Notably, eBay returned a total of $4.1 billion to shareholders between dividends and repurchases in the first quarter.

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