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3 Takeaways From eBay's Quarter

Efficiency plan and portfolio review are positives, but questions linger about the core business.

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We see three takeaways from narrow-moat eBay's (EBAY) third-quarter update, the company's first since the departure of CEO Devin Wenig.

First, competitive and regulatory (sales tax collection among small sellers) headwinds are likely to pressure gross merchandise volume growth, partly neutralize efficiency plans, and keep revenue and operating profit growth confined to the low- to mid-single-digit range near term. EBay's updated 2019 outlook for revenue of $10.75 billion-$10.80 billion (2%-3% growth) and adjusted earnings per share of $2.75-$2.78 strikes us as realistic, as does its initial 2020 outlook for low-single-digit revenue and EPS growth. We expect modest acceleration in subsequent years due to advertising and payments, but it's still difficult to identify a tangible path to matching the low-double-digit growth we expect from the global online commerce industry.

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R.J. Hottovy does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.