Ebay Inc has recently announced a bleak forecast for its first-quarter results, indicating a decrease in online demand, intense competition, and disruptions in the global supply chain. This news has caused a significant drop in the company’s shares, falling by almost 9% during extended trading. E-commerce platforms, which had previously thrived during the pandemic-induced online shopping boom, are now facing uncertainty as vaccination rates increase and brick-and-mortar shopping gains popularity once again.

Ebay’s biggest rival, Amazon.com Inc, has also expressed concerns about its first-quarter sales estimates, highlighting the challenges that e-commerce companies are currently facing. Ebay is already struggling with a decline in active users, and its efforts to increase investments are expected to put even more pressure on its profit margins. Stephen Priest, the company’s finance chief, stated that the second quarter is likely to be the period with the lowest margins for Ebay.

As a consequence of the forecast, Ebay’s shares have fallen to $50.28 during extended trading on Wednesday, marking an 18% decline since the beginning of the year. This downward trend is in stark contrast to the broader S&P Index, which has experienced an 11% decrease. Wall Street’s expectations for Ebay’s first-quarter adjusted profit range from $1.01 to $1.05, with revenue estimated to be between $2.43 billion and $2.48 billion. These figures are lower than anticipated.

In addition, Ebay’s 2022 revenue and profit forecasts have fallen short of expectations, disappointing investors. However, the company did manage to surpass analysts’ average estimates for its fourth-quarter performance. According to IBES data from Refinitiv, Ebay reported an adjusted profit of $1.05 per share on revenue of $2.61 billion, exceeding expectations.

Although Ebay generates revenue from various sources, such as advertising on its platform, its gross merchandise volume has experienced a significant decline of 10% to $20.7 billion. This figure reflects the total value of sales on Ebay, from which the company takes a percentage. Moreover, the number of annual active buyers on the platform has decreased by 9% to 147 million during the quarter.

In conclusion, Ebay’s cautious outlook for the first quarter, along with a decrease in active users and increased investments, has resulted in a pessimistic forecast for the e-commerce company. To regain momentum in an ever-changing market, Ebay will need to make strategic adjustments in the face of declining online shopping frenzy and intensifying competition.

Useful links:
1. Forbes
2. The Wall Street Journal