In a historic and surprising manner, the British people voted to leave the European Union late last week. Global markets have reacted negatively to the news with financials and oil taking the brunt of the beating while gold has made significant gains. The biggest force driving this volatility is the uncertainty surrounding Britain and Europe’s future. Many of the agreements will need to be renegotiated in a way that doesn’t send Britain into recession but also doesn’t push the disintegration of the European Union. Unfortunately, the story isn’t confined to just Europe. Here in the U.S. we have also felt the effect of this historic decision. In fact, many American multinationals generate a large portion of its revenue from the United Kingdom. They include Ebay, JPMorgan, Ford, Gap, and Xerox . With earnings season on the horizon these companies will likely see heavy downward revisions and weaker future earnings.
eBay (EBAY) Information Technology – Internet Software & Services
eBay has had trouble regaining its footing after parting ways with Paypal almost 2 years ago. The business of an online auction house is falling by the wayside for more reliable e-commerce platforms like Amazon. Ebay has taken notice and is slowly abandoning its core business in favor of more “buy it now†options. Given its current struggles to gain traction in the ever changing consumer environment, the Brexit won’t do them any favors. Last quarter eBay pointed to strong performance in Germany and United Kingdom as a primary driver of revenue growth. With the Pound and Euro in a freefall over the past few days this should add to eBay’s woes. And despite reporting a beat last quarter, earnings dropped nearly 40% while sales fell over 50%. The upcoming quarter should be just as bad with the Estimize community looking for a 44% decline on the bottom line and 51% on the top. Shares are down 18% since the start the year and have dropped nearly 10% since the Brexit results.
