Image source: eBay, Inc.
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Shares of eBay Inc. (NASDAQ: EBAY) were down 11% as of 1 p.m. EDT after the online marketplace reported stronger-than-expected third-quarter 2016 results but followed with underwhelmingforward guidance.
Quarterly revenue climbed 6% year over year (8% on a constant currency basis), to $2.22 billion. Gross merchandise volume (GMV) rose 3% year over year (5% at constant currency), to $20.1 billion, including a 2% increase in marketplaces GMV, to $19.0 billion (which generated revenue of $1.8 billion), and 23% growth in StubHub GMV, to $1.1 billion (resulting in revenue of $263 million). eBay also added 1 million active buyers across its platforms, bringing its total number of active buyers to 165 million.
On the bottom line, that translated to adjusted net income from continuing operations of $509 million, or $0.45 per diluted share, the latter of which was bolstered by eBay repurchasing $500 million in shares during the quarter.
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Curiously -- and contrary to what the market's reaction might indicate -- eBay's guidance had called for lower revenue of $2.16 billion to $2.19 billion, and lower adjusted earnings per share of $0.42 to $0.44. And analysts, on average, were looking for revenue and earnings near the high end of eBay's guidance ranges.
For the current quarter, however, eBay expects revenue of $2.36 billion to $2.41 billion, and adjusted earnings per share in the range of $0.52 to $0.54. Analysts' consensus estimates called for revenue and earnings at the high end of those respective ranges.
As a result, eBay now expects revenue of $8.95 billion to $9.0 billion for the full year (an increase from its previous guidance range of $8.85 billion to $8.95 billion), but managementmerelyreiterated its previous outlook for 2016 adjusted earnings per share of $1.85 to $1.90. Here again, Wall Street predicted earnings near the high end of that range on revenue of $8.95 billion.
It is possible that eBay might be underpromising with the intention of overdelivering. Notably, during the subsequent conference call, management elaborated that eBay's margin contraction was primarily due to a combination of the impact of the strong dollar and a higher mix of faster-growth platforms like StubHub, which inherently commands lower gross margin than eBay's core marketplaces platform.
In the end, this was a solid quarter that doesn't invalidate eBay's long-term story. And I think today's tumble could be a great buying opportunity for investors willing to take advantage of the plunge and hold while that story plays out.
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Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of and recommends eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.