The stock of eBay Inc. (EBAY) fell 7.66% between April 25 and May 1 following the company's release of its first-quarter earnings. The e-commerce site's stock was down an additional 1.28% on in trading on Wednesday afternoon.
The company posted solid first-quarter results after the closing bell last Wednesday, with revenue rising 12%, year-over-year, to hit $2.58 billion on the quarter. GAAP net income from continuing operationsstruggled, dropping 60.7% from $1.035 billion in Q1 2017 to $407 million in Q1 2018
The company's guidance called for revenue between $2.57 billion and $2.61 billion last quarter, with adjusted earnings per share forecasts between $0.52 and $0.54. User growth remained positive, with a growth of 4% year-over-year.
The company's active buyers, across all platforms, hit 171 million on the quarter. Users are also spending more money on everything from chess sets to real estate. The company's gross merchandise volume rose 7% on a constant currency basis, or 13% when not accounting for currency fluctuations. Marketplace revenue rose 11% to $2.1 billion. New user experiences on the company platform has led to gross merchandise volumes of $22.5 billion in the last quarter.
Stock prices have plunged dramatically since the earnings release, primarily on investor fears of slowing user growth. The company's 4% growth rate in the first quarter is the lowest since Q4 2016, with eBay posting a steady 5% growth rate from Q1 2017 to Q4 2017.
The company's core U.S. marketplace continues to cool, with a 7% increase in the last quarter, down from an 8% increase the prior quarter. eBay's international market continues to rise, but the growth isn't enough to ease investor concerns.
Transaction fee income also fell from 8.7% to 8.6%.
Marketing and advertising costs rose last quarter, with the company stressing the need to communicate their value proposition to buyers. Operating expenses rose from 49.65% last year to 51.1% as a result of increased marketing and advertising.
Operating margins also fell slightly from a year prior, from 28% to 27% in the most recent quarter.
eBay's CEO claims that the company still has a lot of work ahead of itself and has warned investors that the company will go through periods of volatility. The warning to investors came in the fall of 2017, and the stock's price is suffering in the last week as the company reaffirms their 2018 guidance.
The company expects year sales to rise 8% and forecasts adjusted earnings to be $2.25 to $2.30 per share. eBay is in the middle of a rebound which is expected to continue, albeit at a slower pace. Investors who expected the company's turnaround to happen at a faster pace have since abandoned the stock, which has risen over 22% over the year period ended April 25.
Full-year 2018 revenue is reaffirmed at $10.9 billion to $11.1 billion. Investors had the company's full-year earnings-per-share forecast at $2.29.
eBay's Q1 2018 performance is in line with the company's guidance, but a slowdown in the company's rebound has investors selling off their stock. The company is planning to expand their new inventory authentication system as well as guaranteed delivery service to regain customer confidence.
Disclosure: The author of this article does not have any stake in the listed equities.
