eBay Delivered A Pleasant Fourth Quarter Surprise Despite Ongoing Weaknesses

On Tuesday, eBay Inc EBAY topped market expectations with its fourth quarter performance.  Last month, the online marketplace slashed about 1,000 jobs which adds up to about 9% of its workforce as the industry braces for an uncertain macroeconomic outlook. Even its rival e-commerce giant Amazon.com Inc AMZN wasn’t immune to the layoffs wave. At the beginning of February, Amazon confirmed more layoffs across its Amazon Pharmacy and One Medical segments after initiating job cuts in January across its entire business, including its Buy With Prime and streaming units.    

Fourth Quarter And 2023 highlights

For the quarter ended on December 31st, 2023, eBay reported that revenue grew 2% to $2.56 billion, beating LSEG’s average estimate of $2.51 billion, as business improved toward the end of November, particularly in the U.S. This fourth quarter revenue is eBay’s highest since 2021’s comparable quarter, when it reached $2.61 billion, but its highest quarterly revenue since the beginning of the COVID-19 era is $3.02 billion it generated during 2021’ first quarter.

Adjusted profit per share amounted to $1.07, topping the estimate of $1.03 per share.

Net income rose 8% YoY to $728 million while diluted earnings per share grew by 13% YoY to $1.40. The total volume of goods and services sold, gross merchandise volume rose 2%, to $18.59 billion. Although GMV grew during the quarter on a YoY basis, with organic GMV growth improving YoY during each quarter of 2023, it still decreased slightly for the full year, more specifically 1%. After reaching $100 billion, annual GMV has been declining for three consecutive years now.

For the full year 2023, eBay reported a revenue increase of 3% to $10.11 billion. Active buyers count has remained the same for the last three quarters at 132 million. But despite adding buyer-friendly features, its lost active buyers on a YoY basis to Amazon and rivals.

First Quarter Guidance

eBay guided for revenue in the range between $2.50 billion and $2.54 billion, in line with the analyst consensus estimate of $2.54 billion. As for adjusted earnings, eBay’s guidance is between $1.19 per share and $1.23 per share, surpassing the consensus estimate of $1.13 per share.

A challenging macroeconomic backdrop remains.

eBay continues to face intense competition from larger hybrid marketplaces like Amazon and Walmart WMT. CEO Jamie Iannone reported the company observed weakness in UK and German markets, with the latter even experiencing negative e-commerce growth. But despite flat GMV, eBay recorded a revenue increase that reflects the company’s focus on more profitable sectors and on increasing the span of functions and features for sellers.

eBay is also pursuing a generative AI tool expansion.

During the earnings call on February 27th, eBay revealed that millions of its sellers have already used the AI-powered Magical Listing process that was launched last year to write product descriptions.

eBay is also developing a generative AI tool that uses image-recognition technology to prefill or suggest product titles, categories and similar aspects of an item based on its photo. It is also leveraging AI technology to increase the appeal of sellers’ product images with AI-generated backgrounds.

Being in business for almost three decades, eBay proved the durability of its financial model as it continues to navigate a challenging environment. CFO Steve Priest proudly spoke of the company’s 2023 execution and he expressed confidence in the long-term outlook as eBay continues to bend over backwards to keep its shoppers.

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