Shares of eBay (EBAY, Financial) are up nearly 17% after the company posted impressive results in the most recent quarter. The company beat analyst expectations on the bottom line after announcing EPS of 43 cents compared to a consensus estimate of 42 cents per share.
While eBay missed expectations on revenue after coming short by $60 million, this did not put off investors, who among other positives were buoyed by the company’s announcement of additional $2.5 billion worth of share buybacks.
eBay has experienced a stellar performance since the start of the year, and as Joshua Rodriguez writes at AO Markets, this performance came in part even when the global stock markets appeared to struggle. This is a clear indication that there is a lot of good to expect from eBay from an investor’s viewpoint going forward, and Rodriguez echoes these sentiments.
“Moving forward, I have an overwhelmingly bullish opinion of what we can expect to see from eBay. Through the first quarter earnings release, the company proved to thrive during tough economic conditions. Changes being made are pushing it in a positive direction. All in all, I’m expecting to see further gains in the value of EBAY moving forward,” Rodriguez wrote on AO Markets shortly after eBay announced Q2 results.
(Shares of eBay are up 14% year to date, and this is after a global stock market crunch in late January to early February)
When you look at the company’s stock price in a wider perspective, it is clear that the shares have been on a rally since late June, which suggests that investors began anticipating good results long before the company made the announcement.
eBay has been making changes to its e-commerce platform over the past year and the company’s most recent quarter results seem to suggest that what we’ve witnessed is just the beginning. Indeed, eBay looks to become one of the leading e-commerce platforms in the world, and especially in North America, where Amazon (AMZN, Financial) is the undisputed market leader.
The company is currently on a recovery following a tepid 2014 and its subsequent spinoff of PayPal (PYPL, Financial). The company’s revenues and net income now appear to have hit a level that it can build on after recovering from that awful plunge two years ago.
eBay’s split from PayPal will allow it to focus finances on business specific projects without having to worry how that could affect its former payments unit. Such projects include structural adjustments, like changing the way the company promotes its seller packages.
In May, eBay announced that it was introducing a pilot program that would see it change its commission-based seller packages to what it called “Final Value Fee”. In a previous article, I outlined how this could affect the company’s top line, especially given the fact that it would allow the company to predict future revenues more accurately, while encouraging sellers to sell more.
These types of changes will continue to the foreseeable future as the company looks to return back to the top of the pack in e-commerce.
While commenting on the company’s second quarter results, eBay CEO and President Devin Wenig was very optimistic saying that the quarter good as “we delivered strong results and had acceleration in growth.”
“We are now one year into executing our strategy to provide the best choice, the most relevance, and the most powerful selling platform, and there are signs of momentum in our business. We continue to invest in our platforms to ensure eBay is a global commerce leader for years to come,” Wenig added.
In addition, the company’s continued commitment to the share repurchase program will give investors more optimism as it tries to implement new projects that could shape its future in the e-commerce market.
Conclusion
In summary, eBay’s post-earnings pop may appear to be nothing more but a sucker rally to some investors. However, the company appears to be geared toward more glory in the coming quarters as it continues to implement various changes following the split from PayPal.
eBay’s commitment to the share buyback program can also act as a safety net for skeptical investors, thereby creating more demand for the stock. The company’s revenues appear to have stabilized after the 2014 plunge, while the earnings continue to rise above the expectations.
eBay is well set for a sustainable rally, which means that potential near-term declines could only turn out to be nothing more than pullbacks.
Disclosure: I have no position in any stock mentioned in this article.
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