eBay Inc: Will the New Strategies Work for EBAY Stock?

EBAY StockeBay Inc Needs More Time…

eBay Inc (NASDAQ:EBAY) stock fell almost 11% in the last trading session, closing at $29.02. Despite posting good results, EBAY stock plunged due to weak earnings guidance.

The company has undertaken new initiatives which should benefit eBay stock in the long run.

The e-commerce company said that the expected revenues this quarter will be in the range of $2.36 billion to $2.41 billion, as compared to the analysts’ expectations of $2.4 billion. The company announced third-quarter results that saw sales jump by about six percent to $2.2 billion and adjusted earnings of $0.45 a share. The gross merchandise volume was $20.1 billion.

eBay Inc has been struggling to improve its growth as companies like Amazon.com, Inc. (NASDAQ:AMZN) and Wal-Mart Stores, Inc. (NYSE:WMT) are upping their game. Although the company said it had 165.0 million active buyers on the site, CLSA analyst James Lee indicated that the addition of active buyers was slow in the quarter.

However, Lee expects eBay’s user experience to become better over time, as search results on the web site will be based on products, not merchants. CLSA said that eBay’s improved search engine optimization (SEO) is driving new users to the platform. CLSA currently has an “underperform” rating for eBay stock, but the firm has revised its price target to $30.00 from $27.00. (Source: “Search Engine Optimization Helping eBay attract New Users,” Benzinga, October 20, 2016.)

eBay has been making efforts to move from being a traditional auction web site to being an online shopping platform. With its focus on attracting youngsters and those who prefer shopping on their mobile phones, the e-commerce player has been investing heavily to improve its brand image, as well as enhance the search results for products. The company has also added features like personalized reviews and recommendations.

This is the third straight quarter of sales gains for company, which may indicate that the new strategy is working as planned. EBAY stock has posted gains of about 19% over the past year, as compared to eight percent by the broader S&P 500.

Investors are looking forward to seeing how eBay’s new social media advertising campaign helps the company in rebranding itself and attracting new shoppers, especially younger ones. Profits might continue to be affected as eBay spends more money to make its strategies work. This might take a toll on EBAY stock.