The eBay Inc. application is seen in the App Store on an Apple Inc. iPad in this arranged photograph taken in Tiskilwa, Illinois, U.S. (Photographer: Daniel Acker/Bloomberg)

EBay Gives Disappointing Outlook, Stoking Growth Concerns

(Bloomberg) -- EBay Inc. gave a lackluster sales forecast for the third quarter and lowered its revenue guidance for the year, worrying investors that the online marketplace is losing momentum as the critical holiday season approaches. Shares dropped 5 percent in extended trading.

The company said sales will be $2.64 billion to $2.69 billion in the third quarter, while analysts were projecting $2.73 billion. Earnings per share, excluding some costs, are forecast to be 54 cents to 56 cents, compared with analysts’ average estimate of 56 cents. The company also pared its full-year revenue projection, reviving concerns that EBay is struggling to find its place in the shadow of online retail behemoth Amazon.com Inc.

“When you’re in e-commerce and growing at half the rate of the overall industry, that’s not going to cut it,” said Josh Olson, an analyst at Edward Jones & Co. “Investors don’t come to e-commerce for value. They come to e-commerce for growth.”

Investors are monitoring EBay’s growth to determine if it can remain relevant. Brick-and-mortar retailers like Walmart Inc. are improving their own digital-shopping options, adding more competition and pressure on EBay.

“The buyers on EBay are engaged, but they’re not bringing enough new customers to the platform,” said RJ Hottovy, an analyst at Morningstar Inc. “They’re doing some interesting things, but it’s tough to compete with Amazon.”

In the second quarter, EBay’s profit was 53 cents a share on revenue of $2.64 billion, according to a statement Wednesday. Total gross merchandise volume, a key metric, rose 10 percent to $23.6 billion. Active customer accounts grew 4 percent to 175 million.

EBay Gives Disappointing Outlook, Stoking Growth Concerns

The shares fluctuated wildly after the earnings were announced, tumbling as much as 6.4 percent in extended trading before rising almost 2.5 percent -- and then slipping again 5 percent. The stock closed at $37.95 in New York. EBay shares have see-sawed this year, peaking at $46.19 in February after the company announced it would lower costs by using Adyen BV for payments processing rather than longtime partner PayPal Holdings Inc. It gave the gains back in April after issuing a disappointing second-quarter revenue forecast.

There are signs EBay is struggling. The company in June announced a reorganization that resulted in staff cuts of almost 300 employees. Software engineers and research scientists were among those let go in California, where EBay has its headquarters in San Jose. The company had 14,100 employees globally at the end of 2017. It could take investors time to adjust to a new strategy that sacrifices sales growth for profitability, Hottovy said.

EBay has boosted advertising and changed the marketplace shopping experience in an effort to lure new customers to the site. It tries to differentiate itself from Amazon, which charges yearly or monthly dues for shipping discounts, by emphasizing that EBay has no membership fees to access deals that often include free shipping. It ran a day of discounts on July 16 to compete with Amazon’s Prime Day promotion.

Amazon continues to gain market share, and now boasts 100 million global Prime subscribers. The world’s biggest online retailer will capture 49.1 percent of online spending in the U.S. this year, up from 43.5 percent in 2017, according to EMarketer Inc. EBay is a distant second in the U.S. with 6.6 percent of all spending.

©2018 Bloomberg L.P.