US e-commerce giant eBay issued a conservative forecast for its first-quarter revenues for this year, slightly lowering its expectations amid increasing competition from rivals such as Walmart and Amazon. The figures the company projected on Tuesday is however significantly well below analysts' estimates, reducing confidence in the company's performance throughout the upcoming quarters.
EBay revealed that it expects its first-quarter revenues to be between $2.55 billion and $2.60 billion. This is well below the average analysts' estimates for the quarter of $2.64 billion. The forecast is also significantly lower than the company's revenues in the fourth quarter of last year, which came at $2.82 billion; slightly higher than analysts' expectation of $2.81 billion for the quarter.
Net income for its fourth quarter last year from its continuing operations fell by 69 cents per share to $588 million. This was a significant drop from the company's net income of $763 million in the last quarter in the previous year.
Following the release of its first-quarter forecast, the company's shares dipped by around 5 percent. Analysts have pointed out that eBay is slowly losing market share to its rivals. Walmart, in particular, is eating away at the company's e-commerce business; taking advantage of the company's reduced efforts in the e-commerce space.
Instead of increasing its investments and aggressively taking on its e-commerce rivals, eBay has shifted its efforts to its payments and advertising businesses. However, the company has made some incremental adjustments to its e-commerce platform, with the goal of making it much simpler through features such as personal recommendations and grouped listings.
Last year, eBay also cut close to $116 million in marketing expenses for its fourth quarter. The company's decision to pull back on its marketing efforts has resulted in it losing market share to its rivals.
Ebay's chief financial officer, Andrew Cring, mentioned in the company's post-earnings call that its active buyers were impacted by its decision to reduce its marketing expenses along with other factors that were beyond its control. The company's active buyers did grow by 2 percent in the fourth quarter when compared to the same period in the previous year.
The decision to reduce its overall expenses was also partly made due to added pressure from activist investors that are constantly looking for ways to improve the company's profitability. Pressure from activist investors such as Elliot Management Corp and Starboard Value forced eBay in November last year to unload its ticketing unit Stubhub for $4.05 billion.
