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Author: Alan LittleDate: 2022-02-25

eBay’s (EBAY) declining users, weak outlook send shares 7% lower

eBay (EBAY) traded 7% down on Thursday after the number of global active buyers dipped 9% in Q4 and it warned of a drop in revenue for the current quarter.

eBay (EBAY) shares dipped 7% on Thursday as a drop in the number of active buyers on the online marketplace and a weak outlook dominated the narrative for investors despite its Q4 earnings beat.

eBay did just enough to either match or surpass the Wall Street consensus over the holiday quarter as earnings per share climbed 23.5% from a year ago to $1.05 versus the $0.99 estimates.

Total revenue rose to $2.61bn, which was right in line with expectations.

More concerning was the declining popularity of eBay’s once-thriving e-commerce platform as gross merchandise volume (GMV) slumped 10.4% to $20.7bn, and the number of global active buyers went in the same direction, falling 9% to 147 million.

A warning about poorer performance in Q1 is unlikely to have eased concerns about declining users as eBay guided for flat earnings and a drop in revenue.

CFO Steve Priest said that this was due to “macro tailwinds” and the fact that its margins are being pressured by investments.

However, the platform also appears to be in a “post-pandemic” lull as shoppers return to in-store retailers.

Priest did end his conference call on a brighter note as he said that the medium-term outlook is more promising and should deliver the “cleanest year-over-year comps”.

In a new note, KeyBanc Capital Markets analyst Edward Yruma said that eBay is trying to appeal to more premium, high-end buyers to offset a drop in users.

While this may eventually bear fruit as more buyers look to sell expensive trainers and handbags, Yruma said that the “barometer” for eBay’s overall health should still be based on total active buyer trends.

eBay traded 6.8% down after the report on Thursday and by mid-morning was being bought and sold for $50.82.

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