Can eBay (EBAY) turn the e-commerce boom to its advantage in long term?

Migrating to online marketplaces has been a natural choice for merchants and customers in the virus-hit market, but speculation was rife about the sustainability of the digital shift since the trend started in the early days of the pandemic. When eBay Inc. (NASDAQ: EBAY) released its third-quarter numbers this week, the mixed outcome added to concerns that the e-commerce boom is probably waning.

Also Read: eBay Q3 2020 Earnings Call Transcript

Stock Dips

While the company’s earnings barely matched expectations, the slowdown in the gross merchandise volume growth – the total value of goods sold – didn’t go well with investors. As a result, eBay’s stock slipped into negative territory on Wednesday evening. Currently, experts are divided in their recommendations on the stock, which carries moderate buy rating, though the latest target price points to decent gains in the coming months. In short, it makes sense to wait until a clear picture emerges, before investing.

From eBay’s third-quarter 2020 earnings conference call:

“Looking forward, we are embarking on a multi-quarter journey to improve selling flows that leverage more AI capabilities to dramatically simplify selling and drive more growth for small businesses. The third key priority of our strategy is to cultivate lifelong trusted relationship with buyers. To achieve this, we are leveraging technology to remove friction throughout the buying journey.”

Recovery Hopes

The positive change the online marketplace is currently witnessing bodes well for eBay, which is generally considered a laggard in the e-commerce sector. The company’s stakeholders will be closely following its performance going forward, looking for cues about a potential recovery, especially considering the growth initiatives laid down by newly appointed CEO Jamie Iannone.

Mixed Q3

In the September-quarter eBay’s gross merchandise volume rose at a slower pace of 22%, compared to the previous period, raising concerns that the COVID-driven boom is losing steam. At $0.85 per share, adjusted earnings were up 64% year-over and almost in line with the consensus estimate. Net transactions, the segment that accounts for about 90% of the total business, expanded 29%, driving up total revenues to $2.61 billion. The number of active buyers at the end of the quarter – 183 million – was slightly below the projection.

Bullish Outlook

Interestingly, the management revised up its guidance for fiscal 2020. Beyond that, it expects to continue registering strong revenue and operating income growth through 2022, on an annual basis, leveraging the steady uptick in merchandise volumes and advertising growth.

“We see a long runway to accelerate GMV growth given the $500 billion global total addressable market, we are competing for, but it will take time. By leveraging scalable technology, we can uniquely address the needs of customers across a diverse mix of categories in electronics, fashion, collectibles, home and garden, parts and accessories, and more,” said CEO Jamie Iannone during the post-earnings conference call.

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Read management/analysts’ comments on quarterly results

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eBay’s stock entered a volatile phase after hitting an all-time high of around $60 two months ago. The stock fell sharply this week after the company released its latest quarterly results. Still, the shares are up 36% from the levels seen at the beginning of the year. They traded sharply lower during Thursday’s early trading hours.