eBay

  • eBay   reported a solid set of results for the second quarter of 2021, however the   numbers created confusion in the market, due to the disinvestment of their   Korean business operations.

  • Revenue grew of 14% from $2.34 bn to $2.7 bn, whilst Gross   Merchandise Volumes (GMV) declined by 7% to $22.1 bn. Korean operations were   classified as discontinued businesses, as the company reported a sound beat   in EPS beat of $0.04.

  • The market was disappointed with third quarter guidance due to the   normalization of the business as the Covid-19 lockdowns begin to ease-off   from an extremely high base in 2020. Active buyers declined by 2% to 159   million, whilst active sellers actually grew by 5% to 19 million.

  • This reflects the resilience of the global e-commerce platform,   enabling buyers and sellers to transact in 190 markets on a seamless basis.   With a scaling-up of the payments system, in excess of 80% of the   transactions subsequent to the reporting period should become an important   source of revenue growth in the future.

  • eBay is undergoing a transformation in its business operations with   the sale of low margin non-core assets. This has already reduced the elevated   debt levels, with $5.4 bn in gross cash proceeds expected from asset sales,   which include the sale of the classifieds business for cash and shares, and a   33% stake in Adevinta.

  • These are all part of a multi-year strategy by the new CEO Jamie   Innone which includes focusing on high value buyers making up 75% of gross   merchandise volumes, and with payments convergence and advertising revenues   as important new income sources.

  • The company has generated $1 bn in operating cash flows in the   current quarter, and $910 million in free cash flows (FCF), and appears to be   in a major turnaround. Ebay also announced 9% revenue guidance.

  • eBay ended the second quarter with $13 bn in investments as a result   of the two recent deals. It had a 20% investment in the Korean business and   shares in the Adevinta business.

  • The significant improvement in the financial metrics has enabled the   company to increase the share buybacks from $2 bn to an authorised $5 bn.

  • The share appears to offer good value at a forward PE of 15x, which is standing at a significant discount to its peers. I am a holder ebay shares in client segregated portfolios and believe that this midcap share is part of the new economy, and has good growth potential.

eBay