EBay Inc. profit topped analysts’ estimates in the face of slowing sales growth, showing the company can extract more from its millions of loyal buyers and sellers even if it struggles to attract many new customers.
The company also bowed to pressure from activist investors, saying it is reviewing the role and value of its StubHub and Classifieds businesses "to determine the best path forward to maximize shareholder value."
EBay shares rose almost 6 per cent in extended trading on Wednesday, after closing in New York at US$39.03.
"The idea that management is open to explore a sale of StubHub caught the market’s attention," said RJ Hottovy, an equity analyst at Morningstar Inc. "They still have things to solve with their online marketplace business."
EBay Chief Executive Officer Devin Wenig has struggled to jump start growth since he took the helm in 2015 following a split with PayPal Holdings Inc. Activist investors Elliott Management Corp. and Starboard Value acquired eBay stakes, and in January Elliott proposed changes including the possible sale of tickets marketplace StubHub and the classified ads business.
EBay shares are up about 40 per cent this year, more than double the benchmark S&P 500 Index. Wenig sees advertising and eBay’s new payments business as sources for revenue growth. Earlier this year, he rejected the idea of selling StubHub or other pieces of the company.
"They have assets they can sell to generate cash and return to shareholders," said Victor Anthony, an analyst at Aegis Capital Corp. "The reasons to own the stock remain valid despite the pressure on growth."
Revenue rose 1.8 per cent to US$2.69 billion in the second quarter, in line with analysts estimates. Earnings, excluding some costs, were 68 cents per share in the quarter. Analysts estimated 62 cents U.S., according to data compiled by Bloomberg.
EBay raised its full-year profit forecast to a range of $2.70 to $2.75 per share. Wall Street expected US$2.70 a share, on average.
The company also projected that adjusted profit will be 62 cents U.S. a share to 65 cents a share in the current quarter on revenue of US$2.61 billion to US$2.66 billion. Analysts, on average, estimated profit of 63 cents U.S. a share on revenue of US$2.68 billion.
EBay’s advertising sales soared more than 130 per cent to US$89 million in the second quarter. Over 6,000 merchants have opted into its growing payments platform as eBay unravels a long relationship with PayPal.
The online marketplace said it has 182 million active global buyers who spend about US$100 billion on the platform each year.
Gross merchandise volume -- the value of all goods sold on EBay properties -- fell 4.4 per cent to US$22.6 billion in the second quarter from a year earlier, the San Jose, California-based company said Tuesday in a statement.