eBay Inc will report its second-quarter results before the start of trade on Thursday. The consensus of analysts following the stock is for quarterly earnings per share of 58 cents. For the fiscal year, that figure is projected to be around $2.63 per share. Revenue has increased in each of the last three quarters, and the trend is likely to continue, with current quarter sales forecast to surpass the year-ago total of $4.37 billion by 3 percent to $4.49 billion. Full-year revenue should come in at about $18.73 billion.
This quarter’s figures will be the center of Wall Street attention because Paypal Holdings Inc is being officially spun-off on Friday afternoon. eBay shareholders are in the process of receiving their new separate shares for PayPal, which will start trading on Monday.
So what does the future hold for the e-commerce pioneer, as eBay Inc. prepares for life without its lucrative Paypal Holdings Inc business? Long-time investors who stayed put solely because of PayPal’s growth and spin-off potential may be finally tempted to press the exit button. As an indication of the new pecking order, PayPal’s shares will be kicking parent eBay out of the S&P 100.
Back to Roots
A lot will be riding on incoming Chief Executive Devin Wenig; a former Thomson Reuters executive, who previously headed the eBay Inc Marketplace business. Wenig is planning to return to the company’s roots with a renewed focus on small to medium sellers and buyers.
During the company’s earnings conference call in April, Wenig said, “eBay’s sweet spot is small- and medium-sized merchants and brands,” and promised, “improved seller tools, unmatched access to data and more balanced and predictable policies and standards.”
Plans are also afoot to install a new approach to listings to make them pop up easier in online searches. Also as part of its focus on core competence, eBay has been in talks to sell its enterprise business to Thomas H. Lee and partners for around $1 billion.
Investors Will Need to be Patient
As of now, shareholders who believe in Wenig’s plans to steer eBay Inc back on course will have to be patient. Robert W. Baird analyst Colin Sebastian, who attended a road show luncheon last month, said that the company’s management indicated “this shift in strategy will likely require 18-24 months of ‘transformation,’ including 0-5% growth through 2016 with flat operating margins.”
However, some others on the Street believe that the stand-alone eBay will be ripe for a take-over, with Google Inc as the most oft-cited suitor.
Whatever the outcome, investors will have to be patient, at least for the next 12 to 18 months. Here’s hoping this Internet pioneer can return to its glory days under Wenig.