The Ever-Optimistic eBay Stays Upbeat in Spite of Sluggish Sales Results -- The Motley Fool

The old e-commerce staple of the worldwide web eBay (NASDAQ:EBAY) is still hanging in there: not exactly setting the world on fire, but nonetheless holding its own.

Coming into the second quarter, the world's largest online marketplace had been struggling with slowing growth in its core business, but the stock has surged by double digits this year anyway, as the bottom line continues to make steady upward progress. The second quarter ended up not changing anything much, but it did at least reinforce that the company is still on solid footing -- and is possibly about to monetize some assets.

eBay's revenue improved by 2% during the second quarter, or up 4% when excluding the negative impact from foreign currency exchange rates. Active buyers using the eBay platform were up another 4% year over year -- as they have been for the last six quarters -- to 182 million. While not impressive by itself, eBay converted the modest gains into big profit increases by keeping expenses in check and buying back shares. It's all adding up to a solid year for the online marketplace.

A blight on the slow-and-steady results, though, was another 4% decline in gross merchandise value sold on eBay's platform; GMV was down 4% during the first quarter as well. Net transaction revenue was up 3%, though, as the company continues to take a larger cut from sales. Elsewhere, the smaller marketing services segment shrank 1% year over year during the second quarter. It's not exactly a sustainable long-term trend, but for the moment it's working.

In other announcements, eBay said it reached an agreement to bring its global inventory onto India's e-commerce site Paytm Mall. Along with that came a new 5.5% stake and a cash infusion of at least $150 million into the Indian start-up, putting eBay into further competition with Walmart's (NYSE: WMT) Flipkart.

Though investing in other digital-commerce platforms has helped eBay in recent years, adding more active buyers to its global shopping network -- as well as users to its new managed payments platform (GMV was up 24% from the first quarter alone) -- is the real heart of eBay's growth strategy. And the company may be about to double down on its marketplace and integrated payments.

It's no secret that eBay has been reviewing its StubHub and Classifieds businesses, with the aim of assessing their stand-alone value and offloading them. Both companies could fetch significant sums of money. StubHub grew 7% to $264 million in Q2, and Classifieds was up 5% to $271 million.

As the company continues its review of its noncore businesses, it has been busy making other similar progress elsewhere. For example, it recently reached an agreement to sell its German flash-sale subsidiary brands4friends, which it acquired in early 2011 for $200 million. eBay will be using proceeds from this and other future sales of assets to keep its main marketplace in steady expansion and return shareholder value. During the second quarter alone, $1.5 billion worth of shares were repurchased -- a big reason for the bottom-line increase.

Investors should expect more of the same modest but profitable increases through the rest of 2019. Revenue is expected to grow 2% to 3%, and adjusted earnings from operations should come in at $2.70 to $2.75 per share. Based on that outlook, eBay stock trades for 14.6 times adjusted earnings. That's not terrible, given the company's outlook, and a potential cash infusion if it sells or spins off StubHub and Classifieds later this year.

Source: Fool.com

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