eBay Stock Attempts a Breakout After Mixed Earnings

eBay Inc. (EBAY) shares rose about 5% before giving up much of the gains during Thursday's session. After the market closed on Wednesday, the company reported second quarter revenue that rose 1.5% to $2.68 billion, beating consensus estimates by $10 million, and non-GAAP earnings per share of 68 cents, beating consensus estimates by six cents per share.

The company's third quarter guidance was in line with its previous estimates but on the low end of analyst expectations. During the full year, the company boosted its earnings outlook to $2.70 to $2.75 per share, higher than consensus forecasts of $2.70 per share, but it lowered revenue estimates to $10.75 to $10.83 billion, well below expectations.

Analysts reacted favorably to the strong quarter and mixed outlook. For example, Citi's Mark May raised his price target from $40 to $48 per share, saying that the quarter came in better than feared. He believes that future catalysts aren't fully priced into the stock, including the results of an operational review, potential value from a strategic review, and the outcome of the managed payments initiatives. 

From a technical standpoint, the stock broke out from prior resistance toward fresh 52-week highs following the second quarter financial results. The relative strength index (RSI) continues to hover around neutral levels with a reading of 53.07, but the moving average convergence divergence (MACD) remains in a bearish downtrend. These technical indicators suggest a lot of uncertainty in the market.

Traders should watch for consolidation between the 52-week high of around $42.00 and trendline support at around $38.80 over the coming sessions. If the stock breaks down from trendline support and the 50-day moving average at $38.24, traders could see a move lower toward lower trendline support at $35.50. If the stock breaks out, traders could see consolidation above $42.00 before an extended move higher.

The author holds no position in the stock(s) mentioned except through passively managed index funds.