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EBay Q1 Beats On Earnings And Sales, But Growth Still Lags

EBay ( EBAY ) beat Wall Street’s first-quarter earnings and revenue estimates, the company said Tuesday, and investors rewarded the online merchant with a mild share boost after the close. The San Jose-based online merchant reported adjusted earnings per share of 47 cents, two cents ahead of estimates from analysts polled by Thomson Reuters. EBay said revenue was $2.1 billion for the quarter, slightly ahead of the $2 billion view. In after-hours trading, eBay shares climbed more than 4% at one point to 25.49. But shares settled back to a 1.3% gain later in the afternoon as enthusiasm was tempered by the company’s earnings projection for the second quarter that was short of estimates. In the regular session eBay ended trading up 1.11% to 24.49. “It’s good that they had a beat on top and bottom,” Scot Wingo, chairman of e-commerce consultants ChannelAdvisor, told Investor’s Business Daily. “But what’s driving a lot of their growth, is not the traditional marketplace.” Of the total growth, Wingo said that the core marketplace accounted for only 3% — StubHub, the company’s event-ticketing platform, and its classified business made up the rest of the growth. EBay, once a major e-commerce force, has a ways to go to rival the likes of e-comm powerhouse Amazon.com ( AMZN ). “E-commerce is growing at 15%,” he said. “To really get the turnaround — we’re about halfway through an 18-month turnaround — it would be nice to see some data to see that it is taking hold.” For the second quarter of 2016, eBay said it’s expecting growth of 4% to 6%, or between $2.14 billion and $2.19 billion in sales. The company expects adjusted earnings per share of between 40 cents and 42 cents. Analysts see earnings of 44 cents a share on sales of $2.14 billion. As for eBay’s future prospects, Wingo said, “Historically they’ve gone through slow periods and then accelerated.”

Ollie’s Bargain Outlet Leads Discount Retail Chain Stocks

The rally that began in February has disappointed growth stock investors. Their best names have done little. But one group that stands out is the discount retailers. The industry group is ranked No. 6, rising from No. 43 three months ago. It’s up 17.4% year to date as of Tuesday’s IBD. That’s in contrast to a 2.2% decline for the Nasdaq and a 2.1% gain for the S&P 500. The group has only five companies, all within 6% of 52-week highs. Their strength might be evidence of a desire by money managers to invest in consumer-oriented firms that are still growing amid a soft economy and declining earnings in other sectors. The star of the group is new issue Ollie’s Bargain Outlet ( OLLI ). It broke out of a cup-with-handle base, which was also an IPO base, with a 22.63 buy point March 18. After sputtering for a couple of weeks, it rose sharply, slicing through the profit-taking zone between 20% and 25%. It’s now consolidating in that zone. The company operates what it describes as 207 “semi-lovely” stores, mostly in Eastern states, that sell closeouts, excess inventory, bankruptcies and last year’s colors, patterns and packaging. If your area has had a flood, fire or earthquake, you might find undamaged goods bought from insurance companies. Prices can be up to 70% off. The company wants to grow to 950 stores. Another strong stock in the rally is Five Below ( FIVE ), which caters to teens and tweens with cellphone accessories, toys, casual apparel, sports gear, candy and seasonal items, all costing under $5. It’s been a volatile stock, but the fundamentals have been solid. Last week, Credit Suisse issued a report calling Five Below “one of the most attractive growth stories in retail.” It operates 437 stores but plans to grow to four or five times that many. The five-year annualized EPS growth rate is 45%, although earnings have slowed some in recent quarters. Analysts expect 24% growth this year and 22% in 2017. Dollar General ( DG ) gapped out of a cup-with-handle base with a 76.85 buy point after reporting an 11% increase in fiscal Q4 earnings on March 10. After encouraging investors with a run-up after that, it has pulled back and found support at its 50-day moving average. The pullback came in generally light volume, and the day it found support, April 22, volume was higher, but the stock finished more than 40% off the low of the day. That constitutes bullish action. Two other stocks in the group, Big Lots ( BIG ) and Dollar Tree ( DLTR ), also deserve a look. Big Lots broke out of cup-with-handle base with a 46.23 buy point on April 13 in below-average trade, but volume picked up sharply as the stock rallied nearly 2% to 47.68 in heavy trading. The stock remains in the 5% buy zone. It reported a 14% earnings increase in the last report, slightly above estimates. Dollar Tree has been moving in a narrow trading range for most of this year. Earnings per share have declined vs. year-earlier levels for three straight quarters but are expected to rise 14% in the next report to 81 cents.

Twitter Plunges On Q1 Revenue Miss, Soft Q2 Outlook

Microblogging social network Twitter ( TWTR ), which is trying to respark user growth, late Tuesday posted a Q1 revenue miss and gave Q2 revenue guidance well below expectations, and the stock plunged after hours. Twitter stock was down more than 10% in after-hours trading, after the company released its latest earnings. Shares had risen 3.9% in Tuesday’s regular session, closing at 17.75 and earlier touching a six-week high just shy of 18. The company was set to hold its earnings conference call with analysts later Tuesday. Twitter posted revenue of $594.52 million, up 36% year over year. Analysts polled by Thomson Reuters had expected $607.84 million. The microblog posted EPS ex items of 7 cents, up 114% year over year. That’s above the EPS ex items of 10 cents that analysts polled by Thomson Reuters were expecting. For Q2, Twitter guided revenue of  $590 million to $610 million. That fell far short of the $677.57 million analysts polled by Thomson Reuters had modeled. The company said monthly active users rose 3% from Q1 2015 to 310 million, which also is up from 305 million in Q4. The company has been trading underneath its 2013 IPO price of 26 since late December.