EBay's bleak warning for first half of 2023 slams shares

The eBay logo is pictured on a phone screen in this photo illustration
The eBay logo is pictured on a phone screen in this photo illustration July 23, 2019. REUTERS/Brendan McDermid/Illustration/File Photo

Feb 22 (Reuters) - Ecommerce company EBay Inc (EBAY.O) on Wednesday warned that demand was set to decline in the first half of 2023, after reporting a fall in holiday-quarter earnings due to strained consumer spending in its largest markets of United States and Europe.

Shares fell nearly 6% in trading after the bell, reversing from a 2% rise just after the results.

"While we do see potential for an improvement in underlying economic conditions as the year progresses, it is too early to predict the second half recovery," Chief Financial Officer Steve Priest said during a call with analysts. The company refrained from providing full-year outlook.

While EBay's first-quarter revenue forecast was above Wall Street's expectations betting on demand for its luxury and refurbished product category, analysts said it was not enough to cheer investors.

"EBay's guidance reflected slightly more Q1 optimism than Amazon, but it may not be enough to generate enthusiasm for a business that continues to face headwinds and underperform its ecommerce peers," said Andrew Lipsman, principal analyst at Insider Intelligence.

During the fourth quarter, the company also posted a 12% decline in gross merchandise value (GMV), a widely watched figure for the performance of companies in the e-commerce industry.

After seeing a boost in sales during the pandemic, ecommerce companies are now facing various headwinds including surging expenses, decreasing consumer confidence as well as intense competition from rivals to attract consumers.

Industry giant Amazon.com Inc (AMZN.O) also said its operating profit could fall to zero in the current quarter.

San Jose, California- based EBay forecast current-quarter revenue between $2.46 billion and $2.50 billion, compared with Wall Street's estimates of $2.37 billion, according to Refinitiv data.

Revenue for the quarter ended Dec. 31 fell 4% to $2.51 billion. Analysts are expecting $2.47 billion.

Excluding items, it earned $1.07 per share, also above estimate of $1.06 per shares.

Reporting by Tiyashi Datta in Bengaluru; Editing by Shailesh Kuber

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