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Ebay’s share price is in focus ahead of Q2 earnings

1 Aug 2022 07:09 PM

Ebay’s share price has had a difficult time in 2022 as the reopening of economies has encouraged shoppers to return to the high street, and in turn that has taken activity away from the online arena. Ebay, the other firms in the e-commerce sphere saw a surge in demand from Spring 2020 until late 2021 as shopping habits changed. Prior to Covid-19 hitting the headlines, the eBay share price was hovering around the $38 mark, and it underwent a major rally from mid-March as lockdown’s pushed consumers towards online retailers. In October 2021, eBay’s share price cleared $80, a record high. The stock topped out two-months ahead of the NASDAQ 100, which saw its peak in December 2021.

As we moved into 2022, consumer’s desire to spend money beginning to wane as the release of pent-up demand had run its course. In addition to that, inflation accelerated so that played a part in the cooling of consumer’s habits. In May, eBay’s first quarter results topped forecasts as EPS was $1.05 and analysts were expecting $1.03. Revenue for the three-month period slipped by 6% to $2.5 billion, fractionally ahead of forecasts. Gross merchandise value slumped by 20%. Jamie Iannone, the CEO said the “company delivered another strong quarter”, despite the “current macro headwinds”. Ebay returned $1.4 billon to shareholders, and the vast majority of that came from a share buyback scheme, and $129 million was paid out in the form of a dividend. The group expressed minor concerns about the economic climate, but if they were really worried about the landscape, it is unlikely that would have paid out such a generous amount to its investors.

Since the group posted its first quarter update in May, we have seen some economic reports which suggest the US economy has moved down a peg or two. The CB consumer confidence reading fell to a 17-month low, inflation has set a fresh 40-year high, and the services sector has slipped into contraction territory. Walmart is a bellwether of the bricks and mortar retailers, and the company recently cut its profit guidance due to rising costs, it is possible that eBay might do something similar.

Even though the longer-term trend for eBay shares is to the downside, the stock has rebounded since early June. Last week, eBay’s share price hit its highest mark in nearly two months, and should the bullish run continue, it might target $54.41 or $60.00. A pullback could see it hit the $45.00 region, and a break below that area could bring $41.17 into play.

Ebay will deliver its second quarter results on Wednesday 3 August.

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