EBay rattles investors already spooked by threat of Amazon

SEATTLE—EBay Inc. rattled investors by trimming its annual revenue forecast, signalling that the online marketplace is losing momentum as the critical holiday season approaches.

The reduced revenue projection, on top of lacklustre sales for the second quarter, revived concerns that eBay is struggling to find its place in the shadow of online retail behemoth Amazon.com Inc.

It’s also facing greater competition from brick-and-mortar stores like Walmart Inc., which are improving their own digitalshopping options.

“When you’re in e-commerce and growing at half the rate of the overall industry, that’s not going to cut it,” said Josh Olson, an analyst at Edward Jones & Co.

“Investors don’t come to ecommerce for value. They come to e-commerce for growth.”

Annual revenue will be $10.75 billion to $10.85 billion, eBay said Wednesday in a statement.

The company in April projected $10.9 billion to $11.1 billion in sales for the year. Sales will be $2.64 billion to $2.69 billion in the third quarter, while analysts were projecting $2.73 billion.

Quarterly earnings per share, excluding some costs, are forecast to be 54 cents to 56 cents, compared with analysts’ average estimate of 56 cents.

In the second quarter, eBay’s profit was 53 cents a share on revenue of $2.64 billion, according to a statement Wednesday. Total gross merchandise volume, a key metric, rose 10 per cent to $23.6 billion.

Active customer accounts grew 4 per cent to 175 million.

“The buyers on eBay are engaged, but they’re not bringing enough new customers to the platform,” said RJ Hottovy, an analyst at Morningstar Inc.

“They’re doing some interesting things, but it’s tough to compete with Amazon.”

The shares fluctuated after the earnings were announced, tumbling as much as 6.4 per cent in extended trading Wednesday before rising almost 2.5 per cent — and then slipping again by more than 5 per cent. The stock had closed at $37.95 in New York.

EBay shares have see-sawed this year, peaking at $46.19 in February after the company announced it would lower costs by using Adyen BV for payments processing rather than longtime partner PayPal Holdings Inc.

It gave the gains back in April after issuing a disappointing second-quarter revenue forecast.

There are signs eBay is struggling.

The company in June announced a reorganization that resulted in staff cuts of almost 300 employees. Software engineers and research scientists were among those let go in California, where eBay has its headquarters in San Jose.

The company had 14,100 employees globally at the end of 2017.

It could take investors time to adjust to a new strategy that sacrifices sales growth for profitability, Hottovy said.