eBay Inc Q4 earnings outlook: Will the bears stay at bay?

Written by Dennis Mwenga

eBay Inc. ($EBAY) is an American multinational e-commerce corporation with a market capitalization of 34.72 billion that facilitates consumer-to-consumer and business-to-consumer sales through its website, essentially making it a platform that allows buyers and sellers to transact together and then it takes a percentage of each transaction as a way of earning its revenue.

eBay Inc. is expected to report earnings on February 23 after market close. The report will be for the fiscal Quarter ending Dec 2021. According to Zacks Investment Research, based on 9 analysts’ forecasts, the consensus EPS forecast for the quarter is $0.82. The reported EPS for the same quarter last year was $0.72. Revenue, based on a survey of 24 analysts done by Yahoo Finance, is expected to be 2.61 billion.

In the fiscal third quarter of 2021 which ended on 30th  September 2021 and reported on 28th of November 2021, the company’s revenue was 2.50 billion dollars (+10.76% year/year) and the net income was 264 million dollars also in the same period, while the earnings per share stood at 0.40. It is important to note that eBay  paid an annual dividend of $0.72 per share (an annual dividend yield of 1.29%) and the total shareholder return for the past 12 months is 37%.

Since eBay is an e-commerce player and 90% of its revenue comes from the purchases made on its online platform, investors pay attention to the fact that the higher the flow of visits to the website the higher the prospect of sales, therefore making the company highly dependent on its website popularity for revenues. According to TipRanks, which measures and analyzes a company’s website visits over a specified period, Q4 website visit statistics indicate that there has been a 1.19% rise in total estimated visits. During the onset of the pandemic, eBay was a beneficiary because users looked to the e-commerce retailer and auction site for goods they needed and wanted while avoiding shopping in person, but with economies reopening worldwide the trend seems to be reversing.

Nevertheless according to TipRanks the eBay price forecast and target based on 11 Wall Street analysts offering 12-month price targets for eBay in the last 3 months puts the average price target at $76.36 with a high forecast of $90.00 and a low forecast of $64.00. The average price target represents a 37.68% change from the last price of $55.46. Overall, the stock has a Moderate Buy consensus rating based on 5 Buys and 6 Holds.

eBay price action continues to charge lower on the daily timeframe chart and is trending upwards below the 200 (blue), 50 (red), and 20 (green) simple moving average, having come off a high of $81.96 printed on October 22nd last year and trading in a downtrend channel, eventually finding support at $54.85. Granted that the RSI is indicating that it is oversold and the ADX reading is below 25.00 the downtrend seems to have probably lost some steam here and it will be interesting to see whether the price will remain supported at $54.85 or continue dropping, targeting $51.43. If the price bounces off these levels resistance should be encountered at $56.88-$57.18 and at $60.04, which is at the upper trendline of the downtrend channel.

About the author

Dennis Mwenga

Dennis Mwenga has worked as an independent trader and educator since 2016. His love for the global financial markets grew as a result of his Bachelor of Laws degree and specialization in commercial law and international trade, which drove him to pursue the Chartered Market Technician (I) program in order to build skills for better investment decisions. As a devoted educator, he was encouraged to contribute to an educational series called 222 Days of Foreign Exchange Trading and later co-author a book on the subject, which drove him to seek a career as a mechanical and automated trading systems trainer. He has also organized and hosted financial markets trading educational podcasts and webinar series, in which he interviewed renowned traders, trading mentors, and fund managers with decades of expertise trading a variety of assets in the financial markets.