Tag Archives: ebay

Etsy Jumps On Q4 Earnings, But Long Road To Catch eBay

Investors sent  Etsy ( ETSY ) surging as the online crafts marketplace beat Wall Street’s expectations for its Q4 sales — an important quarter because of holiday sales. The Q4 sales haul reported Wednesday morning was up 35% to $87.9 million and Etsy reported a loss of 4 cents per share ex items. Analysts polled by Thomson Reuters had expected a 1 cent per share loss and sales of $86.5 million. Etsy is an online marketplace for uniquely crafted and curated goods from individual sellers. As such, Etsy has a narrower focus than much larger competitor  eBay ( EBAY ), though like eBay it maintains no physical warehouses or distribution mechanisms. E-commerce giant Amazon ( AMZN ) has edged in on the crafts business idea, launching its Handmade at Amazon program last year. Etsy stock was up 6% to around 8 in afternoon trading in the  stock market today . Etsy has a low IBD Composite Rating of 23, where 99 is the highest. Etsy’s chart has been a slippery slope. Debuting with an 88% pop from its  April 16 IPO  — it was priced at 16 and surged to as much as 35.74 in its first trading day– the stock has steadily declined. Though there were occasional pops, they were short-lived; even with the frenzied buying in the wake of Q4 earnings, Etsy stock still sits nearly 80% off its one-time high. Analysts are cautious about the stock but believe some upside is coming. “We believe growth will converge with overall e-commerce growth over the next couple of years as seller growth diminishes and marketing spend delivers declining yields,” Wedbush analyst Gil Luria wrote in a research note Thursday. Company executives offered 2016-18 compound annual growth guidance of 20% to 25% for revenue and 13% to 17% for gross merchandise sales. Etsy said 2016 should come in at the high end of the range for revenue and around the midpoint for gross merchandise sales. Thursday afternoon analysts polled by Thomson Reuters were modeling for about 25% revenue growth for 2016. Gross merchandise sales is the total dollar value of the goods sold over the Etsy platform. The analyst also noted that Etsy’s marketing spend grew 56% and its digital spend by 86%. “We believe management is content with the return on investment on this spend, this gap (between marketing and gross merchandise sales) is unsustainable and growth rates will be tested as marketing spend diminishes as a percent of revenue in 2016 (per guidance),” Luria wrote. Luria maintained his neutral rating and 12-month price target of 9. Etsy’s gross merchandise sales for 2015 came in at $2.39 billion vs. eBay’s gross merchandise volume of $82 billion. After eBay’s Q4 results, investors went into sell-off mode, sending the stock plunging. Shares were up 1.5% in afternoon trading Thursday. Wells Fargo analyst Matt Nemer wrote in a  research note  that investors may have overreacted to the earnings. Luria said the guidance was lower than what he expected. “In our view, eBay shares are one of the few inexpensive ways to play defense in a slowing consumer environment,” he wrote, adding that executives did not alter the firm’s outlook for its core business. Nemer acknowledged that eBay is in a “transition period,” but he says that in the long run the firm is a “highly stable, flexible, data-driven business that should provide some downside protection in the current environment.”

When Earth Rumbles, Will Silicon Valley Tumble?

As Silicon Valley remains firmly rooted as the global center of technology and innovation, rarely mentioned is one huge fact that could blunt a ton of good vibes: The area is due for a  major earthquake. “There are going to be infrastructure problems,” David Walters, Cisco Systems ( CSCO ) director of global safety and security told IBD. “If it’s 6.5 or greater, the bottom line is that a lot of people are going to be walking.” The U.S. Geological Survey says there’s a 72% chance of a magnitude 6.7 or greater earthquake on one of the region’s many faults in the next 30 years. The percentage shoots up to 89% for a magnitude 6 or greater quake, USGS scientist Morgan Page told IBD. Either could be catastrophic. “The Bay Area has the highest density of active faults per square mile of any urban center in the country, and on a long-term basis it has the highest amount of earthquake energy released per square mile of any urban center in the country,” David Schwartz, a geologist with the U.S. Geological Survey, told the East Bay Express in 2005. “So we’re really kind of living at ground zero.” Silicon Valley Earthquake Damages Could Near $200 Billion A magnitude 7 or greater quake would “likely” spur damage to buildings and infrastructure in the range of $95 billion to $190 billion, says Renee Lee, an analyst with Risk Management Solutions, a firm that models risk for insurance companies. “Despite the area being really well educated about earthquakes, and the substantial investments in infrastructure, we will expect to see some pretty significant damage if there’s a quake along the Hayward fault.” Scientists have long considered the Hayward fault one of the most likely candidates for a major quake within a few decades. The fault runs through Oakland and other heavily populated East Bay cities. What’s all but certain is that Silicon Valley will experience widespread utilities losses — water, power — as well as damage to buildings and infrastructure such as roads and bridges. A phenomenon called liquefaction — in which normally solid soil acts like a liquid — could wreak havoc on any firms with offices near the San Francisco Bay’s shore. Oracle’s main campus, for example, sits atop what’s called bay fill, a material that is highly susceptible to liquefaction. ( Oracle ( ORCL ) spokeswoman Jessica Moore refused to comment on the company’s business-continuity plans in the event of an earthquake, or any other natural disaster.) Facebook ( FB ) and Alphabet ( GOOGL ) also have large campuses located on land susceptible to liquefaction — though less so than Oracle’s (neither of these companies responded to requests for comment). The liquefaction risk to Apple ‘s ( APPL ) office in Cupertino is low. The good news is that the Internet will almost certainly continue to function, for the most part. Service disruptions are likely, but the core backbones that tie the Bay Area to the Internet will remain intact. That might not have been the case 15 years ago, though “even then there were major fiber cuts that the Internet weathered fine,” Mike Leber, CEO of Hurricane Electric, an Internet backbone provider, told IBD via email. And many Silicon Valley companies have been sure to locate data centers in other parts of the country, so service disruptions are less likely. “Our data centers are located at sites which have limited potential for severe weather and seismic events,” Yahoo spokeswoman Carolyn Clark told IBD in an emailed statement. Yet, though the experts can make educated guesses, no one knows how a big one might affect Silicon Valley, or any area, says Anne Wein, a USGS operations research analyst. “The hard work is going to be to get a description about what will happen,” she told IBD. “We’re just not there yet.” The USGS is studying the issue, what it calls “Project Haywire,” and is aiming to complete its research in April, according to spokesman Justin Pressfield. In the meantime, uncertainty will persist. “We haven’t had a major earthquake in the U.S. since we have become so connected with wired and wireless technology,” Wein said. “Do we have new vulnerabilities? How much redundancy is there? How will this new technology help us recover?” Of 15 large Silicon Valley tech companies — and several startups valued by investors at more than $1 billion — that IBD contacted for this report,  Adobe Systems ( ADBE ), eBay ( EBAY ), Oracle and PayPal ( PYPL ) declined to comment and nine did not return the request. Cisco provided access to executives for a wide-ranging interview, and Yahoo issued a brief statement. When asked why tech firms are reluctant to discuss business-continuity plans, Sam Singer, a public relations executive who specializes in crisis situations,  said tech companies are “better at talking about services and products. They’re not prepared to talk about public policy issues, safety issues, even though they ought to be.” He says that there’s no reason why companies shouldn’t be able to describe how they would deal with a natural disaster in the Bay Area without giving away proprietary information. “It’s important that companies discuss earthquakes,” Singer said. “They need to be leaders, and offer reminders to their employees, the public and the news media that we live in earthquake country.” Dick Evans, president of the Business Recovery Managers Association, a networking and information group for disaster recovery planners, told IBD that his group used to have more membership among major Silicon Valley firms. At the moment, he said, “we don’t have as many as we would like.” What Preparedness Might Look Like Cisco has been active in preparing for quakes. It might take the issue more seriously than others, in part, because it’s among the tech giants that were around during the Loma Prieta earthquake of 1989, Walters says. That quake, centered near San Jose and San Francisco, killed 63 people, displaced 12,000, destroyed an estimated $6 billion worth of property and caused an unknown amount of productivity losses. At Cisco’s main offices in San Jose, Walters says the company maintains what it calls “Arks,” which store water, food, tents and emergency supplies for all employees on site — enough supplies to last up to three days. And executives all carry three-day survival backpacks in their vehicles, he says. The company also has a mobile operations center that can staff 13 — and can turn it into a kind of mobile office for execs. The company has five command-and-control centers around the world — with satellite communications abilities and backup generators for incident response vehicles. And the company conducts earthquake drills at its main offices. “We have the right processes, right supplies,” Walters said. “We know as much as we can about the fault lines and we want to be as knowledgeable as possible.” He adds that USGS scientists come in from time to time to talk about the fault lines with Cisco’s safety and security team. The company also monitors incidents around the globe, and has a Tactical Operations team that it deploys on humanitarian missions to restore communications connectivity. Yahoo was willing to share a few details of its plans, though declined to provide access to business continuity executives. Spokeswoman Clark, in a statement, said “Yahoo has prepared our technology, as well as our physical spaces, to allow us to continue to run and operate our business either in California or other parts of the world in the event of catastrophe. We have invested at our mission-critical facilities to provide for alternative power supplies that will allow those facilities to run in the event of a loss of power or other utilities.”

Will Amazon.com Surpass Wal-Mart This Year? Maybe Sort Of

Third-party sellers drive big sales for e-commerce leader  Amazon.com ( AMZN ), so much that if you take a look and add them up, Amazon is getting very close to catching up with longtime retail king Wal-Mart. At least, so says  ChannelAdvisor ( ECOM ) Executive Chairman Scot Wingo, after looking at the numbers in a blog post this week  that he called a deep dive into Amazon’s financials. Looking at third-party sales and what he says is the 10% commission that Amazon takes and includes as revenue in its quarterly financials,  Amazon’s the total transactional value — the amount of goods the company moves — might surpass  Wal-Mart ( WMT ) as soon as this year, Wingo says. ChannelAdvisor works with third-party sellers on Amazon and other platforms, and provides a range of related strategic services and technologies. One caveat is that Wingo excludes groceries, a small business for Amazon at this point but a big one for Wal-Mart. Excluding groceries, Wingo calculates that Amazon’s total transactional value — Amazon revenue plus third-party sellers — was close to $225 billion in 2015. Amazon reported 2015 revenue of $107 billion, but of course that does not include the great majority — 90%, says Wingo — of third-party revenue. Wingo estimates third-party sellers added $131.8 billion to Amazon’s total transactional volume last year, for the total of $225 billion. Wal-Mart hauled in $242 billion when you exclude groceries, which accounted for half of the company’s total revenue of $485 billion in fiscal 2015, Wingo said. He used data for Wal-Mart’s fiscal 2105 ended Jan. 31, 2015, but the company’s final fiscal 2016 revenue is  expected to be roughly the same, with analysts expecting $483 billion. Amazon, on the other hand, has been boosting its annual revenue at a 20% clip. “Amazon has twice the economic impact people think,” Wingo told IBD via email, when we asked about his blog post. Since 2009, Wal-Mart has had a third-party sellers program open to “select” retailers. The company does not break out its revenue for its third-party sellers, and Wingo contends it is not significant. Add it up, and by these metrics, Amazon is heading to surpass Wal-Mart this calendar year. Said Wingo, “unless something slows down at Amazon, it will put considerable pressure on other offline and online retailers.” Amazon did not return several requests for comment. Amazon Pressure On E-Tail Only Getting Worse Yet, Wal-Mart has been “vocal” about its plans to aggressively build-out its e-commerce platforms. In December, Wal-Mart spokesman Dan Toporek told IBD that the firm has been building “dozens” of online fulfillment centers, and has made a big bet on its digital sales platform through its now 2,500-strong workforce in Silicon Valley. Half the company’s online sales are on mobile devices, he said. Nonetheless as Amazon expands, Wingo says other sellers will suffer. In his blog post, he said “we also expect that as Amazon ‘absorbs’ the next $100 (billion) in (market) share, a lot of retailers will lose share as a consequence — some will cease to exist entirely.” It’s going to take Amazon a lot less time to reach its next $100 billion in revenue than it will take Wal-Mart, Wingo wrote. Wingo says in the blog post that Amazon added $20 billion in gross merchandise volume (GMV) in Q4 above Q4 2014, and that those additions alone were near the total Q4 GMV for  eBay ( EBAY ). An eBay spokeswoman has told IBD that third-party sellers are often in danger of being shoved out by Amazon as a result of Amazon deciding to start offering a seller’s product itself. Some observers have said Amazon can learn what is popular by data it gathers from its third-party sales. Wingo, though, says third-party sales are becoming more profitable for Amazon, thanks to the company’s infrastructure expansion and improvements, and that third-party sales are rising much more quickly on Amazon than are Amazon’s sales of its own goods. Amazon’s surging growth has propelled the company to a position in e-tail that in some ways makes it appear  impenetrable  — though the firm’s Q4 earnings  did not meet  lofty expectations . Image provided by Shutterstock .