Firing on All Cylinders
Ashish is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
eBay (NASDAQ: EBAY) recently announced its Q2 earnings results with $3.40 Billion revenues and Non-GAAP EPS of $ 0.56 ahead of street expectations of $3.36 Billion and $.55, respectively. The solid Q2 earnings were mainly driven by strong growth in Marketplaces and Payments.
Marketplace continues to accelerate: Marketplace posted 9% YoY revenue growth with total revenues of $1,814 Million. There was solid growth in active users: 8% YoY to 104.8 million; sold items grew 19.7% YoY, ~3 % more than the last quarter. Total Marketplace GMV grew 7.5% YoY to $18.2 billion, mainly driven by the increasing number of active users and strong performance in categories like fashion, tickets and products and accessories. International marketplace grew 12% YoY generating 57% of the total marketplace revenues while the more saturated US market grew 8% YoY. Marketplace booked a take rate of 8.2%, the highest take rate for the last six quarters. As the structural changes to the marketplace seem to be paying off, we expect to see mid-teens growth for marketplace in the coming years (See: Improvements in Marketplace and Payments Make eBay a Good Buy).
High Payments Margins: Total Payments revenue grew 26% YoY to $1.3 Billion while TPV grew 20% YoY to $34.4 billion. The high take rate of 3.94% resulted in robust Transaction margins of 66.3% compared to 63.6 % in 2Q11. The Payments segment margin improved strongly to 25.8% vs. 21.9% last year. Global active accounts increased to 113.2 Million growing 13% YoY. With the expansion of margins and the increase in global active accounts, we believe that payment may generate considerable revenues for eBay in the long term.
Increase in Mobile Growth: There was considerable growth in mobile transaction volume trends with 600,000 people buying an item for the first time ever on eBay in 2Q12 via mobile. eBay management expects to see a continuous rise in the mobile usage as it increased both its mobile TPV (Total payment volume) and mobile GMV (gross merchandise volume) guidance for FY12 to $10 Billion from a previous $7 Billion and $8 Billion respectively. We believe that eBay will greatly benefit from the mobile theme as more internet availability and better form factors will result in more usage.
eBay to continue buyback: eBay repurchased $335 Million worth of shares in 1Q12 and has authorized a $2 Billion repurchase program which may result in EPS upside and may act as a catalyst for the stock.
We believe that PayPal’s offline has the potential to drive revenue growth in the long term as PayPal in-store payments platform and PayPal Here gains traction. Although eBay lies far behind Amazon (NASDAQ: AMZN) in the marketplace segment right now, it has high take rates as compared to amazon. The company guided for revenues between $3.3-$3.4 billion for the Q3 compared to consensus estimates of $3.42 Billion. The company’s guidance looks conservative to us as we expect to see continued growth in the Marketplace and payments with increased mobile usage. We remain bullish on the stock.
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