eBay stock drops as StubHub growth slows
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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StubHub still “below expectations” after challenging Q3
StubHub is performing below its parent company’s expectations, eBay president and CEO Devin Wenig has said, after posting weak growth for a second consecutive financial quarter in Q3 2017.
The secondary ticketing business’s gross merchandise volume (GMV), or the value of tickets sold, grew 2% to US$1.2bn in Q3, while revenue increased 5% to $275m.
That 2% figure compares to 8% for eBay Inc. as a whole, and follows a 5% decline in GMV in Q2. In Q1, meanwhile, GMV grew 6% and revenues 18%.
Speaking to investors, Wenig (pictured) said StubHub’s half-year stagnation is due to a lack of big events. “One we’ve mentioned before, which is we’ve got a very tough events […] landscape. StubHub is totally dependent on things that are out of its control, which are the lineup of concerts, teams, events. And Q3 last year was – actually, the second half last year was historically good and it’s not quite breaking that way this year. So, that’s just a factor of – it is what it is given the event landscape.”
Wenig also pointed to growing pains associated with StubHub’s ongoing attempts to form primary market relationships with sports teams and promoters – and, without naming any, initiatives such as Ticketmaster’s Verified Fan which restrict the supply of tickets available to the secondary market.
“We have competitors that are looking to restrict markets, restrict ticket access to supply, and we think that’s terrible for fans”
“I also want to point out that the ticket landscape is changing and we need to position StubHub for an evolving ticket landscape,” he continued.
“One thing I’d mention is, in certain areas, we have competitors that are looking to restrict markets, restrict ticket access to supply, and we think that’s terrible for fans. We’ve always been an advocate of open markets. We’ll keep fighting for open markets. There will be more to say about that in due course.
“But it’s – in part, the event landscape lapping and, in part, us positioning StubHub to be a winner and it’s an amazing business and we still believe it’s an amazing business in an evolving ticket landscape.”
While acknowledging that StubHub’s growth improved on Q2, Wenig said he sees a difficult end to the year for the platform. “We do expect continued pressure on growth through the rest of this year, which will continue to weigh on overall eBay and growth rates,” he concluded.
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