E-commerce platform faces tough competition

26 February 2022, Mumbai:

As the e-commerce platform deals with dwindling online demand, tough competition, and worldwide supply chain problems, Ebay Inc anticipated grim first-quarter earnings on Wednesday, sending the company's shares down almost 9% in extended trading.

Online buying flourished last year during the pandemic, raking in enormous revenues for e-commerce businesses, but vaccine rollouts might cause problems when consumers return to brick-and-mortar purchasing. Amazon.com Inc, the company's biggest rival and the world's largest online retailer, has likewise predicted dismal first-quarter sales.

Ebay, which is already suffering from dwindling active users, is expected to take a hit as it ramps up spending, putting pressure on its profits. In a post-earnings conference call, finance head Stephen Priest remarked, "The second quarter should be the low point for margins for the year as we lap severe comps and ramp up our pace of investment."

In extended trading on Wednesday, shares of Ebay, which began as a platform where users could auction off their valuables, plummeted to $50.28. They've lost 18 percent thus far this year, while the S&P 500 has lost 11 percent. Ebay predicts an adjusted profit of $1.01 to $1.05 per share on revenue of $2.43 billion to $2.48 billion in the first quarter, which is below Wall Street's projections.

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The company's sales and profit predictions for 2022 were also lower than expected. Meanwhile, according to IBES data from Refinitiv, Ebay made an adjusted profit of $1.05 per share on revenue of $2.61 billion in the fourth quarter ended Dec. 31, above analysts' average projections.

Ebay's revenue is derived in part from advertising on its site, which exceeded $1 billion last year, according to the business. However, gross merchandise volume, or the total monetary worth of eBay purchases from which the firm earns a commission, dropped 10% to $20.7 billion.

The number of annual active purchasers on eBay fell by 9% to 147 million in the third quarter, according to the business.

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*Figures mentioned in the above article have been sourced from  & Fashion Network article.