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eBay stock drops as StubHub growth slows

Last Thursday (19 July) saw eBay stock fall more than ten percent, its worst performance since October 2016

By Molly Long on 23 Jul 2018

300 people have been laid off at eBay's offices in San Jose, California

300 people have been laid off at eBay's offices in San Jose, California


image © Wikimedia Commons: And3275

After announcing that some 300 jobs were to be cut from its staff in California and lowering its revenue forecast for the rest of the year due to sluggish growth, StubHub’s parent company eBay suffered its worst day on the stock market in nearly two years last Thursday (19 July).

The day saw the value of stock drop by ten percent. As the market closed on Wednesday, stock stood at $37.95 but just 24 hours later the value had plummeted to $34.11 after a day of ups and downs.

After missing Credit Suisse’s quarterly expectations, secondary ticketing service StubHub is thought to have played a key role in the misfortune. Despite reporting a four percent rise in revenue to US$246 million, this was the company’s slowest growth since second quarter 2017. Executives at eBay have put this down largely to a poor sports season in the US, meaning tickets simply weren’t being bought and sold.

“When reports of layoffs are followed by a stock decline, it’s a particularly worrisome development all around.”

“It was a historically bad MLB (baseball) start of the season … and it was a 4-game NBA (basketball) series, it was a 5-game Final Series, it was a 5-game hockey series. There were just a lot of things that broke the wrong way on the landscape,” commented eBay’s CEO Devin Wenig.

Wenig went on to say he did expect the landscape to improve for the rest of the year. This was echoed in a note for investors written by analysts at financial services firm Raymond James. “Marketplace initiatives… are ramping slower than expected and likely shifts potential acceleration to 2019,” reads the note. It goes on to say StubHub’s growth “is likely to remain challenging in the near term.”

The fact eBay’s downturn happened after it announced a cut to staff is thought to be particularly concerning. Kevin Kelleher noted in an article for Fortune that “News of layoffs frequently leads to an increase in share prices, as investors anticipate lower costs will improve profits.

“When reports of layoffs are followed by a stock decline, it’s a particularly worrisome development all around.”

 


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