eBay Inc Earnings Preview: Guidance May Disappoint

eBay is scheduled to release its next earnings report on Wednesday after closing bell, and analysts are expecting earnings of 50 cents per share and revenue of $2.32 billion. The online auction firm has been conducting a share repurchase program that could provide upside to earnings though, say Bank of America Merrill Lynch analysts.

eBay’s valuation looks good

In a report dated Jan. 24, analysts Justin Post and Paul Bieber said they expect a mixed report without any “clear signs of acceleration but possibly some continued improvement from StubHub.” They expect the fourth quarter results to be about in line with expectations but note also that eBay is exposed to the potential macroeconomic pressure this year.

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They continue to rate the stock as a Buy with a $33 per share price objective. They like the company’s current valuation and the possibility for revenue acceleration in the U.S. based on comparisons that should still be easy during the first quarter of this year.

Share buybacks to drive upside

The BAML team believes share repurchases could drive upside to the fourth quarter results. They are assuming gross merchandise volume in the U.S. will grow 3.7% year over year, compared to the 2.6% increase during the third quarter. However, they add that gross merchandise volume might come in a bit low because of the current macro trends. Further, they suggest that stable sequential growth might not be “good enough” because expectations are lower going into the earnings report

For eBay’s international business, they’re projecting a 6% currency neutral growth rate in gross merchandise volume compared to 7% in the third quarter. They’re expecting $300 million in share buybacks during the third quarter.

eBay’s guide might be weak

One area of possible concern is eBay’s guidance for the first quarter and the full year. The BAML analysts expect the first quarter outlook and 2016 guide for earnings and revenue to disappoint because of foreign currency depreciation and macroeconomic conditions. Management usually provides these metrics on the earnings call.

They’re estimating $8.94 billion in revenue for this year and earnings of $1.92 per share. Wall Street’s estimates are $8.98 billion and $1.96 per share. They believe full year guidance could come in at a range of $8.5 billion to $8.8 billion for revenue and between $1.85 and $1.95 per share in earnings. They expect share repurchases to support earnings growth.

Shares of eBay declined by as much as 0.13% to $26.40 per share during regular trading hours today.