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Is It Time to Buy the Dip in eBay ETFs?

Sanghamitra Saha

Shares of eBay Inc. EBAY lost about 9.3% on Oct 24, reflecting the issuance of the below-consensus, fourth-quarter revenue guidance due to the strategic review of its portfolio amid tough competition from the likes of Amazon AMZN and Walmart WMT. Otherwise, the company beat on both lines on Oct 23 after hours.

eBay reported third-quarter 2019 non-GAAP earnings of 67 cents, beating the Zacks Consensus Estimate by 2 cents. The reported figure also improved 19.6% year over year. Net revenues of $2.65 billion also surpassed the Zacks Consensus Estimate of $2.64 billion. The top line was flat on a year-over-year basis (up 2% on an FX-neutral basis).

The company witnessed strong performance by its Classifieds platform during the reported quarter. Further, eBay experienced strong momentum across its managed payments offerings, which processed over $500 million worth of payments during the third quarter. However, StubHub volume failed to exhibit year-over-year growth, which affected eBay’s gross merchandise volume (GMV).

Guidance

For the fourth quarter of 2019, eBay expects revenues within $2.77-$2.82 billion. The Zacks Consensus Estimate for the same is pegged at $2.85 billion. Non-GAAP earnings are expected within 73-76 cents and the Zacks Consensus Estimate for the same is at 77 cents, before the release.

For 2019, the company expects revenues between $10.75 billion and $10.80 billion, indicating FX-neutral growth of 2-3%. The company’s previous guidance was in the range of $10.75 billion to $10.83 billion. Adjusted earnings per share are expected within $2.75-$2.78 against the Zacks Consensus Estimate of $2.75.

ETFs in Focus  

The stock carries a Zacks Rank #2 (Buy) at the time of writing. It belongs to a top-ranked Zacks industry (top 34%) and its VGM Score is an impressive A. Shares of eBay have added about 3.8% since the beginning of the year compared with the S&P 500 Index's rally of 11.2%, indicating solid value in the e-Commerce stock.

Though the pressure on revenue growth is palpable in the earnings scorecard, severe post-earnings loss in the stock justifies that weakness. Investors should also note that the recent slump in the stock could act as a buying point to some e-Bay heavy retail ETFs. This is because the basket approach is safer than the single-stock picking route as it alleviates the stock-specific weakness.

Invesco Dynamic Retail ETF PMR

The 30-stock fund brings eBay into focus at the eighth spot with about 4.45% exposure. The fund charges 63 bps in fees and has a Zacks Rank #3 (Hold) (read: Tap Revenue Growth With These ETFs & Dump Earnings Recession).

ProShares Online Retail ETF ONLN

The underlying ProShares Online Retail Index is a specialized retail index that tracks retailers who principally sell online or through other non-store channels. eBay takes the 12th position in the fund. ONLN charges 58 bps in fees.

Global X E-commerce ETF EBIZ

The 40-stock fund seeks to invest in companies positioned to benefit from the increased adoption of e-commerce as a distribution model including companies with principal business in operating e-commerce platforms and providing e-commerce software plus services. The fund puts 4.30% weight in e-Bay and charges 68 bps in fees.

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eBay Inc. (EBAY) : Free Stock Analysis Report
 
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Invesco Dynamic Retail ETF (PMR): ETF Research Reports
 
Walmart Inc. (WMT) : Free Stock Analysis Report
 
ProShares Online Retail ETF (ONLN): ETF Research Reports
 
Global X E-commerce ETF (EBIZ): ETF Research Reports
 
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