eBay’s Q2 results – first thoughts.

July 16, 2008

ChannelAdvisor ChannelAdvisor By ChannelAdvisor

Exec Summary

While eBay beat the street on the Macro side (revs/EPS) and PayPal kept on chugging, the marketplace saw some deteriorating metrics that are going to be perceived as negative.

Guidance for Q3 is lighter than Wall St. was thinking so the speculation of a beat and raise Q didn’t pan out.

eBay Macro financials

  • RevenueBEAT! – eBay came in at $2.2b vs.the street (consensus) of $2.17b.
  • EPSBEAT! EPS came in at: $.43 vs. the street at $.41.

eBay marketplace health metrics

  • Revenue growth NEG Q2 eBay core revenue grew at 13% y/y (feels like a slowdown as was in the 20’s historically, i’ll have to double check this.)
  • GMV growthMISS Q2 GMV grew at 8% vs. Q1’s 12%. It will take a while for IR to let Wall St. know about the FX contribution here, but my guess is it is 4%-ish so the growth rate of GMV ex-FX would be 4%.  Historically the US is 4-6% slower than international so we could have seen negative US GMV growth for the first time ever in Q2.  This will be a big area of concern on the call.
  • Active users – Active users came in at 84.5m, up .6 from Q1 – so it’s hanging in there, but not really accelerating like Wall St. would like to see.
  • Listings -666.9m listings, 19% y/y growth (if listings were up 19% and GMV was up 4% ex-FX, then conversions went down 15% effectively, assuming ASP was constant).
  • Interesting – Fixed price is now 43% of transactions

PayPal metrics

  • PayPal Revenue – PLUS In Q2, PayPal revenue grew at 33%
  • Transaction Processing Volume (TPV)PLUS In Q2, TPV grew at 35% vs. Q1’s 34% y/y so a little acceleration there.

Optics/body language

  • Stock repurchase – eBay reported that it purchased 19m shares for $566m (slightly more than anticipated).

What to listen for on the call:

Link to call and presentation here.

Most importantly for the conference call is that intangible ‘body language’.  Wall St’s radar is particularly raised about these topics:

  • Macroeconomics – You’d have to live under a rock to not
    have heard about the financial crisis, record oil/gas, consumer
    confidence at a 30yr low, etc.  Wall St. is very concerned this will
    impact ecommerce and online advertising.  Some Wall St’ers are
    perplexed why there hasn’t been a material ‘falling off a cliff’.  I
    have some theories here we can get into in a future post. If eBay says
    something like ‘consumer softness’, you can expect some downside in the
    stock tomorrow.
  • eBay Core – How’s demand?  Why are pageviews down? Finding
    2.0 update? Coupons working?  Microsoft rebate program working? How’s
    BestMatch?  Any changes coming to the fee structure?  Any more
    diamond-tier sellers coming? Can/will that be material 2H08?  The car
    companies are all doing poorly, is this material in eBay Motors? Why is GMV growth slowing?!?

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