EBay drops more than 10% after giving light earnings guidance

Shares of eBay slumped more than 10% on Thursday after the company reported an earnings outlook for the current quarter that fell short of Wall Street’s estimates.

EBay said Wednesday afternoon that it expects 91 cents to 96 cents in adjusted earnings per share and revenue of $2.98 billion to $3.03 billion in the second quarter. Analysts polled by Refinitiv had expected 98 cents per share and $2.98 billion in revenue.

Several investors were spooked by the lighter-than-expected outlook and either downgraded the stock or lowered their price targets. Online marketplaces such as eBay, Amazon, Etsy and Wayfair all face growing pressure to prove that the pandemic-fueled boost to their businesses can last as the vaccine rollout accelerates and the economy reopens.

Wedbush analysts Ygal Arounian and Chad Larkin downgraded eBay on Thursday to neutral from outperform following the results, saying that the guidance implies the company is poised to give back much of the gains it generated in 2020.

“Moreso, visibility into the following quarters as we lap Covid gains is limited as mobility increases,” the analysts wrote in a note to clients. “So we move to the sidelines as we potentially head into four quarters of negative [year-over-year gross merchandise volume] growth.”

The investment firm lowered its price target on eBay shares from $74 to $63.

The disappointing guidance overshadowed eBay’s better-than-expected results for the first quarter. The company posted revenue of $3 billion, which surpassed consensus estimates of $2.97 billion. Adjusted earnings per share were $1.09, higher than Wall Street’s forecast of $1.08.

Gross merchandise volume grew 29% year over year to $27.5 billion, above analysts’ expected $26.3 billion. GMV is a closely watched metric in the e-commerce industry that measures the total value of all goods sold on the site.