Shares of eBay Inc. EBAY dropped about 3.2% on Jul 29, despite beating estimates in the second quarter. The coronavirus outbreak worked wonders for this online retail giant. The pandemic and the resultant need for social distancing has boosted online shopping activities.
However, eBay’s “new outlook disappointed investors who hoped the digital marketplace would take greater advantage of the surge in consumer spending during the pandemic,” per Bloomberg.
Inside Q2 Results
The company reported second-quarter 2020 non-GAAP earnings of $1.08 per share, beating the Zacks Consensus Estimate by 2.8%. The bottom line also improved 63.6% year over year and 40.2% sequentially.
Net revenues of $2.9 billion surpassed the Zacks Consensus Estimate of $2.8 billion. The top line was up 18% and 21% from the prior-year quarter on reported and FX-neutral basis, respectively. Further, the figure surged 20.7% from the prior quarter.
Solid performance of Marketplace platform across all the major end-markets drove the top line. Further, accelerating gross merchandise volume (GMV) of the company contributed significantly to the performance.
Inside the Slightly Somber Outlook
eBay executives said sales increases had plateaued in countries such as Italy and Germany where pandemic restrictions are less severe. This triggered concerns that the golden days of eBay will soon die out and the company will return to its previous sluggish revenue growth mode, per Tom Forte, an analyst at DA Davidson & Co., quoted on Bloomberg.
A decline in federal stimulus money, which could cause a pause in consumer spending, is another concern, per the analysts quoted on Bloomberg. Spending under eBay U.S. jumped 35% in the second quarter, higher than the 22% increment in international spending.
What About ETFs?
The U.S. government is mulling over the rollout of HEALS Act that could offer more than just another $1,200 stimulus check. So, investors fear for a drop in government stimulus seems exaggerated.
The stock carries a Zacks Rank #1 (Strong Buy) at the time of writing. Shares of eBay have added about 51% since the beginning of the year compared with the S&P 500 Index’s decline of about 0.4%. More growth for eBay may be in the cards as the second wave of virus contagion has already hit.
So, some e-Bay heavy retail ETFs could be on your wish list. This is because the basket approach is safer than the single-stock picking route as it alleviates stock-specific weakness.
First Trust Nasdaq Retail ETF FTXD
The underlying Nasdaq US Smart Retail Index is a modified factor-weighted index, designed to provide exposure to U.S. companies within the retail industry. The fund invests about 8.78% in the stock and charges 60 bps.
ProShares Online Retail ETF ONLN
The underlying ProShares Online Retail Index is a specialized retail index that tracks retailers who principally sell online or through other non-store channels. eBay takes 4.54% weight of the fund. ONLN charges 58 bps in fees.
Global X E-commerce ETF (EBIZ)
The 40-stock fund seeks to invest in companies positioned to benefit from the increased adoption of e-commerce as a distribution model including companies with principal business in operating e-commerce platforms and providing e-commerce software plus services. The fund puts 5.14% weight in e-Bay and charges 50 bps in fees.