Last week saw the newest yearly earnings release from eBay Inc. (NASDAQ:EBAY), an important milestone in the company's journey to build a stronger business. eBay reported US$11b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$2.10 beat expectations, being 5.7% higher than what analysts expected. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, eBay's 30 analysts currently expect revenues in 2020 to be US$10.8b, approximately in line with the last 12 months. Statutory earnings per share are expected to increase 5.9% to US$2.23. In the lead-up to this report, analysts had been modelling revenues of US$11.0b and earnings per share (EPS) of US$2.17 in 2020. If anything, analysts look to have become slightly more optimistic overall; while they decreased their revenue forecasts, EPS predictions increased and ultimately earnings are more important.
The consensus has made no major changes to the price target of US$39.05, suggesting the forecast improvement in earnings is expected to offset the decline in revenues next year. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on eBay, with the most bullish analyst valuing it at US$50.00 and the most bearish at US$30.00 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 0.4% revenue decline a notable change from historical growth of 6.7% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 17% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect eBay to grow slower than the wider market.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards eBay following these results. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. Yet - earnings are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on eBay. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for eBay going out to 2024, and you can see them free on our platform here..
You can also view our analysis of eBay's balance sheet, and whether we think eBay is carrying too much debt, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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