Online marketplace eBay (NASDAQ:EBAY) met Wall Street’s revenue expectations in Q4 CY2024, but sales were flat year on year at $2.58 billion. On the other hand, next quarter’s revenue guidance of $2.54 billion was less impressive, coming in 2.3% below analysts’ estimates. Its non-GAAP profit of $1.25 per share was 4.3% above analysts’ consensus estimates.
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eBay (EBAY) Q4 CY2024 Highlights:
- Revenue: $2.58 billion vs analyst estimates of $2.58 billion (flat year on year, in line)
- Adjusted EPS: $1.25 vs analyst estimates of $1.20 (4.3% beat)
- Adjusted EBITDA: $764 million vs analyst estimates of $778.4 million (29.6% margin, 1.8% miss)
- Revenue Guidance for Q1 CY2025 is $2.54 billion at the midpoint, below analyst estimates of $2.60 billion
- Adjusted EPS guidance for Q1 CY2025 is $1.34 at the midpoint, roughly in line with what analysts were expecting
- Operating Margin: 21.1%, up from 16% in the same quarter last year
- Free Cash Flow Margin: 21.7%, down from 25.1% in the previous quarter
- Active Buyers: 134 million, up 2 million year on year
- Market Capitalization: $33.98 billion
"eBay achieved three consecutive quarters of GMV growth to end 2024, and we took significant steps toward our vision of reinventing the future of ecommerce for enthusiasts," said Jamie Iannone, Chief Executive Officer at eBay.
Company Overview
Originally known as the first online auction site, eBay (NASDAQ:EBAY) is one of the world’s largest online marketplaces.
Online Marketplace
Marketplaces have existed for centuries. Where once it was a main street in a small town or a mall in the suburbs, sellers benefitted from proximity to one another because they could draw customers by offering convenience and selection. Today, a myriad of online marketplaces fulfill that same role, aggregating large customer bases, which attracts commission-paying sellers, generating flywheel scale effects that feed back into further customer acquisition.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, eBay struggled to consistently increase demand as its $10.28 billion of sales for the trailing 12 months was close to its revenue three years ago. This was below our standards and suggests it’s a lower quality business.
This quarter, eBay’s $2.58 billion of revenue was flat year on year and in line with Wall Street’s estimates. Company management is currently guiding for flat sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 3.2% over the next 12 months. Although this projection implies its newer products and services will catalyze better top-line performance, it is still below average for the sector.
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Active Buyers
Buyer Growth
As an online marketplace, eBay generates revenue growth by increasing both the number of users on its platform and the average order size in dollars.
eBay struggled to engage its audience over the last two years as its active buyers have declined by 1.6% annually to 134 million in the latest quarter. This performance isn't ideal because internet usage is secular, meaning there are typically unaddressed market opportunities. If eBay wants to accelerate growth, it likely needs to enhance the appeal of its current offerings or innovate with new products. 
Luckily, eBay added 2 million active buyers in Q4, leading to 1.5% year-on-year growth. The quarterly print was higher than its two-year result, suggesting its new initiatives are accelerating buyer growth.
Revenue Per Buyer
Average revenue per buyer (ARPB) is a critical metric to track for online marketplace businesses like eBay because it measures how much the company earns in transaction fees from each buyer. ARPB also gives us unique insights into a user’s average order size and eBay’s take rate, or "cut", on each order.
eBay’s ARPB growth has been mediocre over the last two years, averaging 4.2%. This raises questions about its platform’s health when paired with its declining active buyers. If eBay wants to grow its buyers, it must either develop new features or lower its monetization of existing ones. 
This quarter, eBay’s ARPB clocked in at $19.25. It was flat year on year, worse than the change in its active buyers.
Key Takeaways from eBay’s Q4 Results
We struggled to find many positives in these results. Its revenue guidance for next quarter missed significantly and its EBITDA fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 7.3% to $64.04 immediately after reporting.
eBay underperformed this quarter, but does that create an opportunity to invest right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
