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eBay's Disappointing First Quarter Results Lead to Stock Decline
eBay reported Q1 revenue of $2.6 billion, a 2% increase, exceeding guidance. However, its sales forecast for Q2 fell below expectations, impacting investor confidence and causing the stock to slide. The company also returned $638 million to shareholders in Q1.
eBay Inc. reported its first-quarter results for 2024, showing modest revenue growth amidst a challenging environment for discretionary spending. The company announced revenues of $2.6 billion, marking a 2% increase from the previous year and slightly exceeding its guidance. Despite the modest revenue growth, eBay's forecast for the second quarter fell short of expectations, leading to a decline in investor confidence and a subsequent dip in the stock price by approximately 5% in after-hours trading.
The company's gross merchandise volume (GMV) showed marginal gains, reaching $18.6 billion. However, the number of active buyers remained flat at 131 million, underscoring the challenges eBay faces in driving growth amidst cautious consumer spending. CEO Jamie Iannone expressed optimism about turning GMV growth positive by the third or fourth quarter of the year, attributing the company's focus on categories such as motor parts and accessories for the potential uplift.
eBay is also betting heavily on artificial intelligence (AI) to transform the shopping experience on its platform. The company has been rolling out AI tools designed to offer personalized recommendations to users based on their preferences and sizes. The initiative aims to drive engagement and sales by making the discovery of products more intuitive and tailored to individual users. AI has also been credited with driving efficiency and productivity improvements within the organization.
Another bright spot for eBay has been its first-party advertising, which grew by 28% during the quarter. Total ad revenue accounted for 2.1% of GMV, indicating a growing stream of income for the company. A significant part of this growth was attributed to off-site ads, which have been performing well in their beta phase.
Despite these positive developments, the company's chief financial officer, Steve Priest, highlighted the challenges of an "uneven demand environment" in major markets, particularly the U.K. and Germany. The company's GMV in the U.S. remained essentially flat, reflecting the broader challenges faced by the e-commerce sector in driving growth amid economic uncertainties.
For the current quarter, eBay expects GMV to be flat or down by up to 2%. This forecast reflects ongoing challenges in cross-border commerce, inflationary pressures, and a weaker demand backdrop in Europe compared to the U.S.
Looking ahead, eBay anticipates revenue in the range of $2.49 to $2.54 billion for the second quarter of 2024, with diluted GAAP EPS expected to be between $0.76 and $0.81, and diluted Non-GAAP EPS forecasted to be between $1.10 and $1.15. The company also announced a cash dividend of $0.27 per share, payable in June 2024.
eBay's strategic focus on AI, advertising growth, and category specialization reflects its efforts to adapt and thrive in a challenging retail landscape. Nonetheless, the company's outlook signals continued caution as it navigates economic headwinds and seeks to reinvigorate growth in its core marketplace.
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