eBay shares dived on weaker-than-expected Q4 guidance

EBay (EBAY) shares fell Thursday, weighted by amid analyst’s disappointment on weaker-than-expected fourth-quarter guidance after a strong third quarter. The e-commerce company’s stock shredded 7.5 percent despite beating Wall Street expectations its third-quarter results.

The company reported adjusted earnings of 85 cents per share compared with 77 cents expected by analysts surveyed by Refinitiv. Revenue also surpassed expectations with eBay reporting 2.61 billion versus 2.48 billion dollars expected.

However, in a note to clients, Atlantic Equities cited weak guidance for international sales and said there were signs the benefits from Covid were “transitory” for eBay.

The retailer’s stock recently traded at 48.54 dollars, down 8.9 percent. EBay shares have climbed 35 percent year to date, according to Bloomberg data. EBay's guidance for the fourth quarter had analysts wondering whether the boost the e-commerce site got from consumers visiting during the coronavirus pandemic would fade.

Kunal Madhukar of Deutsche Bank cut his share-price target to 59 dollars from 64 dollars and affirmed his buy rating. “The fourth-quarter guide -- of low-double-digit [gross merchandise value] growth, down from 21 percent in the third quarter -- was underwhelming,” he wrote in a commentary cited by Bloomberg.

Analysts’ doubts about eBay’s performance in the long term weight the stock

Echoing Madhukar’s doubts about the company’s performance in the next three months, analyst Aaron Kessler At Raymond James kept his market-perform rating, indicating that “While we are encouraged by a healthy third quarter, slowing near-term trends are likely to be an investor concern.” In a commentary cited by Bloomberg, he noted that growth overseas slowed in the third quarter, following a loosening of mobility restrictions.

“EBay’s relevance to consumers in a normalised environment continues to be a key concern,” he wrote in a commentary cited by Bloomberg. The stock’s valuation sits one standard deviation above the historical average, indicating further gains are already priced in, Brent Thill of Jefferies said. He has a ‘hold’ rating on eBay, with a share-price target of 58 dollars.

On the positive end of the analyst spectrum was Morningstar analyst R.J. Hottovy who wrote that “while current trends aren't likely to sustain over the next five years, we continue to see a path to high-single-digit top-line growth.”

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