eBay disappoints with revenue results but surprises with EPS
Yesterday, the results of California-based internet retail giant eBay were presented.
Over the past week, eBay’s share price has been under heavy pressure, falling more than 11% since the release of Amazon's disappointing results on 29 July – which had a negative knock-on effect on other e-commerce stocks.
In April, eBay warned that it expected a slowdown in its business as vaccination programs progressed, businesses reopened and social restrictions ended.
Analysts had reason to pay attention to the company's results after the consolidation process that the company is going through, focusing on its core business and detaching itself from other business initiatives such as:
- The sale of StubHub, a secondary market for sports, music and live event tickets, for more than $4 billion in 2019.
- The sale of most of its operations in South Korea for about $3 billion.
The strategy utilised by eBay CEO Jamie Iannone in order to stem the decline in revenue has been to attempt to increase revenue generation through advertising and commissions on online payments.
The end result in this quarter has been somewhat of a paradox.
Despite recording revenue of $2.67 billion, 10% less than forecasted, thanks to cost reduction, Earnings per Share (EPS) increased, reaching $0.99 as opposed to the $0.96 anticipated by analysts.
Source: Admirals MetaTrader 5, EBAY Daily - Data range: March 10, 2020 to August 12, 2021, conducted August 12, 2021 at 10:00 am CET. Past performance is not a reliable indicator of future results.
The chart above shows the evolution of eBay’s share price since 10 March 2020 on a daily basis.
The chart shows how, since mid-November 2020, eBay's share price has moved sideways within a bullish channel of approximately $14 width.
Traders have respected this figure, using the RSI indicator to take profits and, in the up cycles, using the 10-period exponential moving average (orange) to re-enter the market.
In recent days, the eBay share price touched the resistance of this bullish channel and the RSI indicator entered the overbought zone, something that traders interpreted as signals to collect profits and re-enter the market at the 100-period exponential moving average (red).
It would be interesting to see the behaviour of the market during the first hours of trading today, as there could be strong fluctuations in the price of eBay shares. The improvement in EPS could be used as a boost to the price in a market that had already discounted the fall in revenue, triggering the stock back upwards towards the channel resistance.
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