eBay Expects Holiday Season to Be a Nailbiter
eBay is setting expectations for the coming holiday season low in spite of a strong Q3 and impressive strength in mobile. The problem, it says, is the U.S. economy, which isn't likely to encourage big spending. That could work in eBay's favor, though. "eBay's biggest strength is still the price of goods," said Coracent CEO Ron Rule. "I think their holiday season will be fine."
eBay's third-quarter earnings report showed gains in revenue and earnings, but the company's stock dipped on its warning that a weak U.S. economy might lead to lower-than-expected fourth-quarter gains.
Revenue was up 14 percent in eBay's third quarter, with the company bringing in US$3.9 billion compared with the $3.4 billion it reported a year earlier. Net income rose to $689 million, or 53 cents per share, a 15 percent increase from the $597 million it realized in the year-ago period.
eBay's strong mobile performance helped drive some of those gains. Mobile commerce volume rose 75 percent in Q3, and 3.2 million new customers started using eBay's mobile app, which has been downloaded 200 million times since its launch.
eBay-owned PayPal added 5 million new customers and saw a 19 percent revenue increase. Its total registered accounts have climbed to 137 million, a 17 percent jump.
eBay's fourth-quarter forecast wasn't as rosy, however, with the company predicting below-average holiday spending in the e-commerce space, thanks to weakness in the U.S. economy. It estimated its revenue will total between $4.5 billion and $4.6 billion for the quarter ending Dec. 31 -- a bit lower than the $4.64 billion analysts had expected.
eBay's stock tumbled more than 5 percent to hover around $50.10 cents per share in after-hours trading following news of the weak outlook. It recovered slightly Thursday, closing at $51.38.
Solid in the Space
eBay's earnings report highlights the company's biggest strengths right now -- its mobile advances and its integration of PayPal into its ecosystem, said e-commerce consultant Rob Abdul.
"eBay is an e-commerce champion," he told the E-Commerce Times. "The company has made excellent inroads with the growing market of mobile and handheld devices. It continues to be a market leader with double-digit growth figures, and the jewel in its crown is PayPal."
In an age when companies are struggling to adapt their core services to an increasingly mobile lifestyle, eBay's performance over the past few quarters is especially impressive, said Ron Rule, CEO of Coracent.
"Their mobile app is really intuitive -- better than what a lot of companies are doing," he told the E-Commerce Times. It's "easy to search and filter. Bidding and Buy It Now are both a breeze, and the barcode scanner feature makes it easy to participate in showrooming. You almost always can find a better deal on eBay."
Weathering the Storm
If consumer holiday spending is as feeble in the e-commerce space as the company is predicting, though, even the solid growth in eBay's core business might not be enough to keep shares from slipping going into the new year, said Abdul.
"Politics and weaker currency exchange rates are beyond the control of individual companies," he noted. "eBay is doing everything right, and every tweak that can be made and every advantage that can be explored is being explored. They just have to sit tight and weather the storm as the holiday or after brings promise of a brighter outlook."
That brighter outlook might come sooner than expected, suggested Rule, since eBay's low prices make it a compelling choice for holiday shoppers looking for bargains.
"eBay's biggest strength is still the price of goods, since sellers can get products from dropshippers and sell on eBay with virtually no overhead," he added. "There will always be a steady stream of popular low-priced products. I think their holiday season will be fine."