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eBay Slumps on Slower Growth: What About ETFs?

E-commerce giant eBay Inc EBAY came up with Q2 results after the closing bell on July 20 and shares plunged about 5.2% after hours on mixed results.

Earnings of $0.34 per share (accounting for stock-based employee compensation and other before nonrecurring items) missed the Zacks Consensus Estimate of $0.36. But $2.33 billion in sales were marginally better than the estimate of $2.31 billion. There was only 4% revenue growth from last year.

Net transaction revenues showed a gradual improvement of 4% in the quarter with the Marketplace segment registering 5% growth. StubHub’s net transaction revenues witnessed an even weaker growth rate of 1% in Q2.

The company’s gross merchandise volume increased 3% to $21.5 billion in the second quarter. The growth rate was lower in Q2 than 5% recorded in the last quarter.

Inside the Weak Guidance

eBay expects non-GAAP net revenues between $2.35 billion and $2.39 billion in the third quarter. Analysts’ consensus is $2.32 billion. For full-year 2017, the company expects net revenues between $9.3 billion and $9.5 billion. Analysts are expecting $9.4 billion in revenues, in line with the issued guidance.

For the upcoming quarter, eBay forecast earnings of $0.46 to $0.48 per share which “fell on the lower end of analyst expectations.”

Should You Play eBay ETFs?

The company’s streamlining initiatives and strategy to spin off the PayPal business seems to be taking longer to be fruitful. Though the company is striving to accelerate sales growth, it is facing stiff competition from other e-commerce bellwethers like Amazon AMZN.

The stock has a Zacks Rank #3 (Hold) at the time of writing. The Zacks Industry Rank is in the top 20%. However, the VGM (Value-Growth-Momentum) score is an unimpressive D. 

So, gutsy investors with a long-term view may use this dip as an entry point to eBay-rich ETFs. Another big reason is that the company’s Zacks Industry Rank is in the top 20%. Plus those ETFs have greater exposure to some heavyweight companies of the tech sector.

PowerShares Nasdaq Internet Portfolio PNQI

This fund gives investors exposure to the broad Internet industry. The fund holds about 90 stocks in its basket while charging 60 bps in fees per year.

The in-focus eBay occupies the sixth position with 4.06% allocation while Netflix takes the top position with about 8.48%. In terms of industrial exposure, internet software and services make up for 55% of the basket, followed by internet retail (39.5%). PNQI was down about 0.13% on July 20, 2017 (read: How to Tap Netflix Subscriber Growth with ETFs).

First Trust Dow Jones Internet Index FDN

This is one of the most popular and liquid ETFs in the broad technology space. The fund charges 54 bps in fees per year. In total, it holds 42 stocks in its basket with the in-focus e-Bay taking the eighth spot with 4.03% share. From a sector look, information technology accounts for about 70% of the portfolio while consumer discretionary makes up 20%. FDN was down about 0.3% on July 20, 2017.

Amplify Online Retail ETF IBUY

This 40-stock ETF comprises stocks that are into online retailing. eBay takes the eleventh spot in the fund and accounts for about 3.10% of the product. IBUY was down 0.7% on July 20, 2017 (read: 3 ETFs & Stocks to Buy Post June Retail Sales).

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eBay Inc. (EBAY): Free Stock Analysis Report
 
PWRSH-ND INTRNT (PNQI): ETF Research Reports
 
FT-DJ INTRNT IX (FDN): ETF Research Reports
 
AMPL-ONLN RETL (IBUY): ETF Research Reports
 
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