Strong dollar biggest contributor to cautious guidance: eBay CEO
Although eBay reported earnings that were in-line with expectations, its guidance rattled investors and sent the stock down in early trading Thursday. CEO John Donahoe said the price move is likely an overreaction.
"We had a strong second quarter," Donahoe told "Squawk on the Street" Thursday. The company's guidance wasn't lowered, he said, instead, "while people were expecting us to be at the high end of our guidance, we simply said that we're still going to be within our full-year guidance, but we'll use the full range of it."
(Read more: EBay reports earnings, talks of 'headwinds')
The reason for the full-range statement was weak macro conditions in key markets such as Europe and Korea, he said.
"We came into the year with a modest outlook for Europe," Donahoe said. "What's happened is that it has just been a little weaker than we expected."
Korea, on the other hand, has a "variety of political factors, economic factors and uncertainty," and eBay has seen growth slow for e-commerce overall, he said, adding that the country "is a notoriously dynamic market.
"We're still very bullish about our future and the business, and we're in a great market," Donahoe said, forecasting growth in the mid-teens globally for the second half.
Second-quarter net income was $822 million, or 63 cents a share, versus $730 million and 56 cents in the year-earlier period. Revenue rose 14 percent, to $3.88 billion. The company was expected to earn 63 cents a share on revenue of $3.89 billion, according to Thomson Reuters I/B/E/S.
Donahoe has led a turnaround at eBay that focuses on mobile shoppers, international expansion and tie-ups with local physical stores. It is spending heavily on these initiatives and looks for this strategy to fuel revenue and profit growth in coming years.
(Related: Cramer: Why I'm buying eBay now)
When asked about the effect of a stronger dollar on eBay's business, he said that it is "probably the largest single factor in why we've guided to the full range of our annual guidance."
Donahoe pointed out that eBay uses hedging strategies to minimize the bottom-line impact, whereas a strong dollar's primary effect is on top-line revenues. But he estimated that about 22 percent of eBay's business deals with cross-border transactions, affecting trade flows as currencies fluctuate.
One flow the company is seeing right now is increased exports from Asia and Europe to the U.S., on both the eBay and PayPal platforms. "That's a good thing for our business," Donahoe said.
Mobile growth for eBay has been "enormous," and a streamlined payment system for sellers is charging them only when they sell items, helping incentivize them to use its platform, he said, adding that eBay's business in North America is stronger than expected this year, driven mostly by growth in mobile.