EBAY eBay Inc

By Steven Russolillo 

For eBay Inc., striking out on its own has created a surprising development: more volatility.

Some 18 months after the e-commerce titan carved off its payments subsidiary -- what is now PayPal Holdings Inc. -- eBay's share price has gotten noticeably choppier. The stock has had double-digit percentage swings after four of its previous five earnings reports, rallying twice and plunging twice. Before that, eBay went 13 straight quarters without such a move.

Much of this is due to the ebb and flow of eBay's ongoing transformation into more of an online marketplace and less of a traditional auction platform. With success also comes steep competition from other e-commerce platforms, notably Amazon.com Inc. Fourth-quarter earnings for the key holiday season, out Wednesday, should soothe jittery investors.

Analysts polled by FactSet expect earnings of 53 cents per share, up from 50 cents in the year-earlier period. But this isn't necessarily the best metric to gauge how shares will react. Over the past five years, eBay has exceeded quarterly earnings estimates all but once, yet the stock has risen on the day after earnings just 60% of the time. Revenue is expected to have increased by 3.5% to $2.4 billion, which would be a fourth straight quarter of sales gains.

A better indicator is gross merchandise volume -- the value of items sold on eBay's site. After a sluggish few years, growth picked up again at the end of 2015 and continued last year. When eBay's shares jumped 11% following its earnings report in July -- one of its biggest gains over the past five years -- gross merchandise volume growth had its best quarter since 2014.

When the stock dropped 11% in October after eBay reported a disappointing outlook, growth also slowed and fell short of analysts' views. Expectations are more reasonable for the fourth quarter, with analysts anticipating 2.7% growth from a year ago.

Whether growth can keep improving is based largely on eBay's efforts to reorganize its marketplace. It is focusing on so-called structured data, with a goal of improving its search functionality and boosting its standing in Google results. Active buyers on eBay's site are expected to increase for a third straight quarter thanks to these efforts.

EBay also is counting on strong growth from its lucrative StubHub marketplace. And with its new ad campaign, eBay is aiming for a younger audience by trying to capture millennial consumers who spend more time shopping on their phones.

With plenty of cash on hand and an ardent buyer of its own stock, eBay shares are attractive. Any further volatility offers a reason to bid more.

Write to Steven Russolillo at steven.russolillo@wsj.com

(END) Dow Jones Newswires

January 25, 2017 02:48 ET (07:48 GMT)

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