E-commerce retailer eBay (EBAY 33.26, -0.43, -1.28%) trims a
portion of its YTD advance after the company’s revelation last night of a
package of capital return items that could be viewed as an attempt to combat
recent activist activity in the company. The capital returns came juxtaposed
against a mixed fourth quarter print and guidance for decent earnings.
eBay’s capital return programs included the initiation of the company’s first quarterly dividend in its history. The company plans to pay $0.14 per share on or about March 20, 2019 to shareholders of record as of the close of business on March 1, 2019. Furthermore, management announced plans to increase its share repurchase authorization by an additional $4.0 bln with no expiration, with an expected 2019 share repurchase of about $5.0 bln.
eBay, which has reportedly been under pressure from activists Starboard Value LP and Elliott Management, plans to beef up its capital return program to return about $7.0 bln to shareholders through dividends and repurchases over the next two years, with around $5.5 bln up for consideration in 2019 and the remaining approximately $1.5 bln in 2020. In Elliott’s January 22 letter to eBay management, the activist firm specifically called out the company’s lack of a capital return program, suggesting that the company could readily sustain and should implement a 1.5% dividend yield and iterating its view that eBay could offer ongoing share repurchases.
Simply put, eBay reported fourth quarter earnings per share of $0.71, modestly ahead of market expectations. The result was helped along by nearly $1.5 bln in stock repurchases, tallying roughly 52 mln shares, in the quarter.
Fourth quarter net revenues were up about 6.3% to $2.88 bln on a 1% increase in as reported gross merchandise volume (GMV) to $24.6 bln (up 2% on an FX-Neutral basis). The company’s active buyer count rose higher by 4% year/year, extending to 179 mln global active buyers. Last quarter, eBay reported GMV growth of 5% both on an as-reported basis and in FX-Neutral terms.
Fourth quarter non-GAAP operating margins fell to 29.2%, compared to 29.8% for the same period last year. For context, in the third quarter of 2018, non-GAAP operating margins were down to 26.4%.
Underlying total eBay performance, the Marketplace platforms delivered $2.3 bln of revenue and $23.2 bln of GMV. Marketplace revenue growth was 7% on an as-reported basis and 6% on a FX-Neutral basis, and GMV was up 1% on an as-reported basis and 3% on an FX-Neutral basis.
StubHub drove revenue of $314 mln, up 2% on both an as-reported and FX-Neutral basis, and GMV of $1.4 bln, down 2% on an as-reported basis and down 1% on a FX-Neutral basis. Classifieds platforms delivered revenue of $263 mln, up 8% on an as-reported basis and 11% on an FX-Neutral basis.
Profit guidance for both the first quarter of 2019 and the full year 2019 came in ahead of market expectations, in part due to the announced increase to share repurchases. Net revenue guidance was under market views, though, as eBay attempts to counteract slowing growth with incentives for shareholders to stay around.
Specifically, eBay sees first quarter EPS of $0.62-0.64 on net revenue between $2.55-2.60 bln. Full year 2019 EPS is slated to range between $2.62-2.68 on net revenues of $10.7-10.9 bln.
The stock sinks further below the 200-day simple moving average (33.76) on Wednesday, after breaking that level yesterday, as investors appear to need more in order to hold on for the long-term than the capital return initiatives announced last night. eBay may yet have to succumb completely to the wishes of activist investors, but at least for the time being, the noise has quieted a little.
- OUR VIEW
- LEARNING CENTER