Etsy, Inc. (ETSY) on Q1 2021 Results - Earnings Call Transcript
Debra Wasser: Hi, everyone, and welcome to Etsy's First Quarter 2021 Earnings Conference Call. I'm Deb Wasser, Vice President of Investor Relations and ESG Engagement. Joining me today are Josh Silverman, CEO; Rachel Glaser, CFO; and Gabe Ratcliff, our Director of Investor Relations. Today's prepared remarks have been prerecorded. The slide deck has also been posted to our website for your reference. Once we are finished with Josh and Rachel's presentations, we will transition to a live video webcast Q&A session. Question can be submitted by the Q&A window chat displayed on your screen. Feel free to use it at any time, as it will remain open throughout the entire conference call. I'll be reading your questions, and Gabe will help me try to get to as many as we can. Joshua Silverman: Thanks, Deb, and good evening, everyone. Q1 was another really strong quarter for Etsy in terms of its financial results and also in terms of its corporate citizenship. I'd like to start this evening by talking a little bit about some of those citizenship efforts. Etsy continues to speak out against racism and harassment. For example, in the first quarter, we donated $500,000 to support the AAPI community, and we continue to invest in highlighting the wonderful work of many different underrepresented sellers within our buyer community. For example, our partnership with the Gee's Bend Quilters from Alabama. I am delighted to report that many of the Gee's Bend shops sold-out within the first 24 hours of the launch of that initiative. Etsy also launched Donate to Change where buyers can round up to support the Uplift Fund, which provides a path to entrepreneurship for many different communities. And we had over 1 million buyers round up to support the Uplift Fund in just the last six weeks of the quarter. Third, Etsy continues to deepen its commitment to environmental sustainability, announcing our goal to be Net Zero by 2030. This continues to pave our pathway as a trail-breaker with one of the most ambitious targets of any of our peer group. As I said, our Q1 results were excellent. Consolidated GMS was $3.1 billion, up 128% year-over-year. And that's really the result of strength in the core and continued positive momentum in frequency. You'll also notice that we came in above the top of guidance, guidance that we gave in late February. Most of that overshoot relative to guidance was due to the impact of stimulus and Rachel is going to talk about that more in her section. Rachel Glaser: Thanks, Josh, and thank you, everyone for joining us for our call. My commentary today will cover consolidated results, key drivers of performance and Etsy's standalone results where appropriate. We saw continued momentum in Q1 as we delivered another strong quarter across the board, delivering higher than expected GMS and revenue and healthy adjusted EBITDA. A - Debra Wasser: Okay. Hi, everyone. We're going to dive right in. We have quite a lot of questions in the queue. If we don't get to your question in the next half an hour or so, please feel free to email us at our address. So I’ll start with a question from Darren Aftahi from ROTH. Darren Aftahi: On your Search and Discovery goals specifically on a semantic gap, what are you working on that will improve this gap in 2021? And longer-term, how good can your search results mirror a shopper's intent? Debra Wasser: I think we'll start with Josh for that one. Joshua Silverman: Great. I love it. And thank you for that question. I can kick out on this stuff all day. So out with me. So just to be clear, semantic gap is about translating what you meant with what you actually wrote. So for example, cocktail attire for men, a good search result for that might be a blue blazer. And yet the word cocktail nor attire might appear in the title of a blue blazer. So there's a lot of work we've been doing to improve our models on that, and we’ve been making great progress. Three things I talk about that are underway that we think are exciting. One is using neural or deep learning models to expand the number of candidates of a 100 million items picking the right small set that are actually appropriate from which you can then rank from one to 500 is actually a big part of that task, that first pass through the 100 million listings to find the right candidates. And we're starting now to leverage deep learning models to do that. A second thing I would say is what do you do for listings that are relatively new that haven't been exposed to very many buyers where you have very few data points. So we're starting now to interpolate with new listings where we think they might be relevant. And a third thing we're doing in semantic bridge is language agnosticity. So you might've done your search in French, but we're going to show you German, some German search results as well. Those are three examples, but I also don't want to imply that when we launch a neural model that we are done and we move on, we might spend years optimizing that model. And so we are in the very early days of launching these models and experimenting and improving our results with these models. So to the question of how good can we get, I don't know, we'll find out. I think, we'll never be perfect. But we can get a lot better than we are. And we are already a lot better than we were even one-year ago. The other thing I'd say in this area is that we won't always speak with words. And so one of the things we're focused on now is how can we use pictures. Let us show you some things, you might not even know the words to express what you want. But we might be able to show you some ideas. And as you interact with those ideas that tells us what you want and we get better and better. Darren Aftahi: Okay. Great. Thanks Josh. Debra Wasser: Next one is from Maria Ripps from Canaccord. Maria Ripps: With growth in habitual buyers accelerating so strongly, can you talk about the key drivers there? In addition to multiple search and platform improvements as we just discussed, is there anything else you would highlight from the category engagement standpoint that's driving the strong buyer engagement? Debra Wasser: Josh, do you want to start there? Joshua Silverman: Well, ultimately in my prerecorded remarks, we are very focused on building more hooks into the experience to engage you and have you come back wanting more. And importantly having the site be very rewarding in terms of what's next. For those of you, and hopefully all of you use Etsy regularly, the Etsy homepage has been the rearview mirror for many years. You show up on Etsy, and it's things you've recently viewed or things you've recently favorited, or it's a bunch of things you've already done. We're moving much more now to show you more recommendations, more leaning forward, things you might like, things you haven't seen. Shops you’ve favorited. Here is three new items from those shops. And so we're both figuring out how to learn more about your tastes and preferences so we can provide better recommendations and then entice you with things that we think are going to be interesting to make you want to come back more and more. And part of that is of course the listing experience and recommendations. But part of that is things like video. And when we talk about videos, by the way, it's not just shooting that item from multiple angles. Some of the videos that we're finding are most mesmerizing are the making of videos. Customers seem very interested in how did you actually make this product and they can watch those for hours sometimes, its fun and inspiring and that's uniquely Etsy. You're not going to find that on other platforms. And so finding ways to really engage customers in the platform is something we're very focused on as well as all of the marketing efforts. And the television investment we're doing and the performance marketing investment we're doing also help to keep Etsy top of mind and really make us a place that people want to come back to. And I'm particularly proud that when we ask customers now in both the U.S. and the UK a very generic question, which is just, what are your favorite places to shop online? Etsy is now top 10 in both of those two markets. And that's the kind of thing we're going for, that we're top of mind and we're not like what's your favorite hand-made site, or what's your favorite place to go for niche? Just what's your favorite place to shop online? Etsy is now at top 10 site by our internal survey work in both the U.S. and the UK. And I think that's really encouraging. The second part of your question was about category mix. And I can guess like you can guess, what's going to happen with home furnishings? What's going to happen with events like weddings? What I would say is, one of the parts of the Etsy model that I like the most is that we can speculate a lot, but we don't actually do anything differently at Etsy. We have a 100 million items for sale on Etsy today. So whatever is hot tomorrow, there's an enormously high probability that we have it. And if we don't have it, it will be on the site within hours. And so our marketplace responds very dynamically to trends and our performance marketing system picks that up in largely real time. And boy, did we ever see that through COVID, right. We have an incredibly agile and dynamic marketplace. So unlike so many others, we're not sitting around guessing what's going to happen in June and buying inventory against that and putting marketing spend against that only to maybe be proven right, and maybe be proven wrong. We have a marketplace that naturally adapts. And we tend to work much more horizontally on making sure that the seller experience is really good, making sure that the buyer experience is really good and whatever they want to buy and sell in that particular moment is great by us. Maria Ripps: Okay. Great. Thanks Josh. Debra Wasser: The next one, I think is for Rachel. This is from Lauren Schenk at Morgan Stanley. Lauren Schenk: Last quarter, you mentioned Q1 take rate would likely be the high watermark for the year. Is that still the case? What are the puts and takes to thinking about regarding the take rate through the rest of the year? Rachel Glaser: Hi, Lauren. Thank you for the question. So we did say that Q1 would likely be the high watermark and the guidance we just gave at the midpoint implies that we're stable to the Q1 take rate, if not, just a little bit higher. Some of the things that are driving take rate improvement are Offsite Ads program, our Etsy Payments and our Etsy Ads, which are all stable and growing. And so we didn't give guidance for the full-year. I can remind you, though, that usually in the fourth quarter, we see the take rates might hit their lowest point, just because revenue relative to the very, very high conversion rate we get on transactions, GMS will increase significantly and our – and the non – the elements of revenue that are not variable with GMS, like listing fees and Etsy Ads will be relatively lower. So Q4 relatively low point in the year, Q1 and Q2 are stable and strong as we've guided. Lauren Schenk: Great. Thanks, Rachel. Perfect. Debra Wasser: Next one is from Ygal Arounian from Wedbush. Ygal Arounian: It's actually a very multipart question, some of which we've done already. So I'm going to stick with the first part of it. Now that we're through the COVID year, and we think about the opportunity to keep the significant surge of new buyers you've had potentially increasing their frequency. What are the main products that allow you to keep the new and reactivated buyers coming back to Etsy? I think by products, I think we mean product experiences, but we probably can interpret that in multiple ways? Joshua Silverman: Yes. I mean, obviously with the 100 million items for sale or more on the site now, it’s likely we've got it with the exception of a few categories that really aren't appropriate. So the main thing is keeping the main thing, the main thing, people need to have a great experience on Etsy. When they come, when they browse, when they shop. And I've talked a bit about some of the things we're doing to drive more engagement and keep you coming back, personalization, recommendations, videos. Let me talk a little bit about seller performance. I'm really quite excited about that as well. In addition, our sellers want agency, they want to know what they can do that will make them more successful. And we have the ability to do a better job telling them that. So the more we can provide them with, for example, a customer satisfaction scorecard, here are the five metrics that matter most to your buyers. And here's how you rank relative to other sellers relative to what good looks like. That will be very helpful for sellers. And it will let them know where to invest their precious time and energy. And in doing so, I have no doubt that the clearer we can be about what good looks like and where they are relative to that, the more they will rise to that opportunity and do a great job. And that creates a race to the top that makes the experience better for all of our buyers. And so some of the things we've already launched in that area are around fulfillment time. You as a buyer want to know when the item is going to come and then you want it to, it needs to arrive on time. And so you've seen us now on the seller dashboard launch very clear to seller, here is what needs to ship today. Here's what needs to ship tomorrow. And we've started to experiment with what's the easiest way to explain to sellers how they're doing on fulfillment, and what good looks like there. And you should see us do more and more of that. And I think that's going to be very helpful in terms of lifting all boats and making the buyer experience at Etsy better and better and better, combined with the marketing efforts that we're doing that are keeping Etsy top of mind, so that as we have a fantastic experience that delivers so often, we're there and we're planting the seed and we're building a habit. And us leaning into brand marketing right now is part of that. I think that's a – this is a fantastic time for us to be reinforcing what is unique and special and different about Etsy and how often we're relevant for buyers. Debra Wasser: Okay. The next one comes from John Colantuoni from Jefferies. John Colantuoni: Even after experiencing impressive growth and frequency and retention over the past year, average spend per buyer on Etsy is still less than the third of other key e-commerce players. I know it's not a perfect comparison, but can you talk about what initiatives you’ve been implementing to continue driving spend higher even from today's levels? And then assuming higher spending flows through to higher lifetime value over time, how should we think about the margin implications of spending to drive a more valuable buyer, particularly when a portion of those buyers are coming from the Offsite Ads program? Debra Wasser: Rachel, do you want to maybe take that one? Rachel Glaser: I can start, and I’d love just to weigh in. So I think one of the things that is really resonating with people through our marketing is why to come to Etsy and when to come to Etsy. And so we've talked before in the past about thinking about Etsy, not just for the cushions, but for the couch. And as we see more in the increase of habitual buyers and the significant increase in frequency, that's an example of people coming and really understanding the breadth of product that Etsy has to offer. I’ll also mention that the average order values are higher in Reverb, for instance. So as Reverb also grows, we get increase in higher spending items there as well. Higher average order values may imply that we have higher – some higher margin to invest there with our marketing. And so that works – the whole ecosystem will work positively in that regard. To date, though, the primary growth we've gotten from GMS has been more visits and higher conversion rates, and that's where our efforts have really focused. And that's where we're getting a lot of the value creation from the marketing investment. Joshua Silverman: I'll only add that I agree with your thesis. If you look at something like SimilarWeb, it says that Etsy and Wayfair are pretty comparable in terms of visits per unique visitor per month or per quarter. But in eBay is 3x our level. And Wayfair is only home furnishings. Etsy is across many, many categories. So it stands to reason that we would look more like an eBay than we would like a Wayfair. So I agree that there is a lot of opportunity for us to do better. And that's about really helping our buyers understand the breadth of offering that's available on Etsy and all the different times that we can actually serve them. And we're doing more. So for example, and right now for brand new buyers, we're using video to have a brief, like welcome to Etsy moment, where we start to explain to them all the different things that we have on offer. We're doing some quizzes. Tell us the kinds of things you like, and you tend to buy, which by the way, also plants the seed for all the different things you can buy on Etsy. And then when I think about consumer sentiment, I think that over the next coming years, and we're already starting to have this, there's going to be some introspection around shopping your values and where you want to buy and who you want to support. And I think Etsy is going to do very well as people think more and more about, do I want to spend all of my e-commerce dollars with one place or do I want to support small businesses? I think people are going to want to support small businesses a little more particularly when those small businesses deliver a great experience at a fair price. And I think we can do that. I think our sellers can do that. John Colantuoni: Okay. Great. Debra Wasser: I think I'll go to one from Nick Jones at Citi. Nicholas Jones: In the press release, you noted that Offsite Ads has expanded to include more affiliate channels. Can you touch on the puts and takes of optimizing your current channels versus adding more affiliate channels? Rachel Glaser: Shall I jump in on that one? Debra Wasser: So, yes. Rachel Glaser: Okay. So the first thing I'll say is that the vast majority of Offsite Ads and all available ad inventory is on two sites and that's Google and Facebook with their PLA programs. And that's where – and we're already there on those things. It's great that we've been able to add Google Display Network and affiliates into the mix. But I would consider those to be as much smaller portion of where we see the growth coming from. Future growth will really come from continued increases in conversion rate on the site. And so that's where we're really focused. I'll put in one more, we gave a data point on this call also that I think is just worthy of mentioning that our Offsite Ads program gives us about a 30% offset in the quarter. It gave us about 30% offset to our entire performance marketing spend. And so when you think about Etsy's profitability and marketing spend, it's important to look at that piece of revenue that is offsetting what you see in our marketing line. So we're really getting good – we have a lot of spending power. We can spend deeper as we make these LTV increases from things like Offsite Ads and product improvements. Debra Wasser: Okay. The next one from Jason Helfstein at Oppenheimer. Jason Helfstein: Can you talk about the quarter-over-quarter acceleration in seller services? And how you see that playing out for the rest of the year? Debra Wasser: Rachel, you just want to start with that? Rachel Glaser: Deb, do you mind repeating the question? Jason Helfstein: Sure. Can you talk about the quarter-over-quarter acceleration in seller services? And how you see that playing out for the rest of the year? Rachel Glaser: So we had about – over 90% increase in our Etsy Ads product. And we – again, that benefit from increased conversion rates and increased traffic to Etsy’s site. We didn't give full-year guidance beyond Q2 and we didn't give specifically services guidance to the services revenue. But we believe there's a lot of strength in that product and increased demand for the site and increased conversion rates should support those – should support our services revenue there. The other services that we have, of course, our shipping and few other ancillary line items. And so the majority of our services growth is going to come from our Etsy Ads product. Jason Helfstein: Great. Perfect. Thanks Rachel. Debra Wasser: The next one is from Nick Jones at Citi. And I think this will be great one for Josh to take. Nicholas Jones: As Etsy laps tough comps over last year, and you take stock of Etsy brand recognition pre-COVID versus today, how would you quantify and qualify the improvement of brand recognition in terms of Etsy being top of mind for shoppers? Joshua Silverman: I would say its better, but not best. We have a lot of opportunities still to go. By our internal survey work, we have made meaningful improvements throughout the funnel, so unaided awareness, visit intention and preference. And in fact, we continue to see a slightly concave curve and that more people say that they are passionate evangelists of us, then say have an immediate intent to come back and shop in the near-term. So that continues to be a gap around what are your needs and does Etsy have things for your needs. So reminding them that many things they want to buy, you could actually find on Etsy. But we've seen that entire brand awareness funnel go up. And we're very pleased by that. I'm sure it's a combination of plenty of people actually visiting the site over the course of the prior months and quarters and being happy with what they've seen. It might've been their first time on Etsy, or they might not have been on Etsy in a while. And I think it's a better Etsy than it was a few years ago. And I think people are seeing that and feeling that and experiencing that. And I think our marketing efforts are having a meaningful impact on that. Our above-the-line marketing efforts, our below-the-line marketing efforts and influencers talking about us and friends over Zoom calls talking about that great purchase they just made. And all of that is helping to push brand awareness. Ultimately, what matters is, if you tell someone, you have the following purchase mission, you need to buy a gift for your mother for Mother's Day. You have two seconds, where do you go? What is on the tip of your tongue, that's what we're going for. And so that's where the survey research, just asking people, what are your 10 favorite places to shop online? That's our ambition. We don't want to be the best handmade place. We don't want to be the best home furnishing place. When we ask people, what's your favorite place to shop online? I want them to say Etsy. And I think that that ambition is the right ambition for us. And we are now a top 10 site according to our internal research for many customers in the United States and the UK, but we can certainly move up that ranking. It'd be great to be top five. And by the way, there's a lot more markets in the world than just the U.S. and the UK. Debra Wasser: Yes. Josh, I thought you might want to add in there a little bit about Germany in case people didn't hear what you had to say on the – we had a slide in there. Yes. Joshua Silverman: We are making progress in Germany and Germany saw a really nice growth in 2020, and we've got more vibrancy now on the buyer and the seller side than we did before. But brand awareness in Germany is still actually quite low. If you ask the average German, where do you go to shop online? Not a ton of them are going to put Etsy in their top 10 or even necessarily going to have Etsy in the tip of the tongue. So in the past, what we've done is we've really leaned on performance marketing until awareness in the market is very high, and then we go with TV. In Germany, we're experimenting with going with TV earlier. Can we drive brand awareness, which is in fact, going to turn the funnel faster and make our performance marketing more efficient? And so that's an experiment that we're running starting in the second quarter. We'll run it for a little while. You don't learn this in just one quarter. But we're spending an incremental $15 million in television ads in the second quarter. Almost all of that is going to be in the UK and Germany to see what TV can do over time. And I would expect that to be an investment that'll span through 2021. But over at least the course of this year, what can that do to our brand metrics. Nicholas Jones: Okay. Great. Thanks Josh. Debra Wasser: Next one is from Laura Champine at Loop. This one is for Rachel. Laura Champine: Can you update us on your long-term margin expectation given that 2020 likely created several changes relative to your thoughts at the most recent Analyst Day, which was in 2019? Rachel Glaser: Hi, Laura. So we did give guidance for margins in Q2 and from that guidance, you can see that they contract a little bit from what we delivered over 30% margins in Q1. And we've been talking for most of 2020, and we talked about it again last quarter that we would expect some margin contraction because we think now is the time to be investing. In fact, the words we used on this call are we're leaving far too many things on the cutting room floor. The thing that takes a bit of time to ramp is hiring people. And we are accelerating the hiring. We talked about hiring 100 people in Q1. Year-over-year, Q1 was 100 and was 18% growth in all of – sorry, it was 18% growth, not 118% growth in terms of headcount adds versus Q1 of last year. But that's up from 14% in all of 2020. So you can see the uptick in hiring. And as we get more people onboard, that ought to contract margins a bit. We would expect those to yield future top side gains in future quarters. And then you just heard Josh talk about investment in brand marketing. We're going to continue to lean into brand marketing. And in fact, we're spending $15 million more in Q2 in brand marketing, most of which is in UK and Germany. And so those things also will yield. But with brand marketing, the payback curve is a little bit longer. And so those things taken together without giving you specific guidance on margins, we believe we have a wonderful healthy business model with low fixed costs and not capital intensive, but these are the years that we'd like to be investing for that long-term growth to get future margin expansion. Laura Champine: Perfect. Thanks, Rachel. Debra Wasser: And then I'm going to slide one more last one in here before we finish from Shweta Khajuria of Evercore ISI. Shweta Khajuria: Which of the product and marketing initiatives were most impactful in driving GMS growth, and importantly buyer frequency and habitual buyer growth? Debra Wasser: Josh, do you want to start with that? And then Rachel can add anything that she wants to? Joshua Silverman: Sure. There hasn't been one launch, that's been the big thing. And I do think that these tend to work collectively. So it is getting easier to find what you want on the site, meaningfully, easier to find what you want on the site. When you find it, it's feeling more human. And you're gaining more trust in the fact that it's going to arrive on time, it's going to be what you want. We'll have your back if anything goes wrong. And we're making it easier for our sellers to do their job servicing customers and taking away some of the administrative work and other things for our sellers. And those things in combination are leading to a really good experience, which is what matters in terms of having people come back more and more, and we're also projecting that more into the market through marketing, right. So I really can't point to one thing that was like the big thing. I'm happy about that because I hate to bet our business on one big swing for the fences. We think that working collectively and having this virtuous cycle spin our flywheel faster is a really healthy way to go. Debra Wasser: Okay. I think that's a great way to end it. We are out of time. If anybody didn't get their question answered, please email us. We're happy to chat. We will talk to you all very soon. Take care. Joshua Silverman: Thanks so much.
Etsy Stock Downgrade: JMP Securities Adjusts Outlook Amid Market Challenges
Etsy's Stock Downgraded by JMP Securities
On May 2, 2024, JMP Securities adjusted its outlook on Etsy (ETSY:NASDAQ), downgrading the stock to Market Perform. This change in stance was announced with Etsy's shares priced at $58.95. The downgrade by JMP Securities comes at a time when Etsy's stock has been under significant pressure, experiencing its lowest price since the onset of the Covid-19 stock market crash in early 2020. Despite trading above $300 in late 2021, the online retailer's shares have plummeted, particularly after its earnings report on Thursday. This downturn is attributed to a challenging consumer environment, as detailed by Renita Young. Further insights and details can be found in the coverage provided by the Schwab Network on YouTube.
Etsy's Financial Performance and Market Challenges
Etsy's recent financial performance has been less than stellar, with the company experiencing a significant drop in its stock price following a report of disappointing sales results for the first quarter. The online marketplace, known for its handmade and vintage products, saw its shares decline by 13.9% as of early afternoon. This downturn comes in the wake of flat revenue growth and a decrease in profits, marking a challenging period for Etsy, which had previously thrived during the pandemic. Despite the pandemic's peak being over two years ago, Etsy has struggled to achieve growth in the post-pandemic landscape.
The company's Gross Merchandise Sales (GMS), a critical measure of the total value of goods sold on the platform, decreased by 3.7% to $2.99 billion. This decline was partly due to the sale of Elo7, a Brazilian online marketplace Etsy had acquired a few years prior and sold last August. Revenue for the quarter saw a marginal increase of 0.8% to $646 million, barely meeting the estimates of $646.3 million. This slight revenue uptick is attributed to higher fees charged by the company. Furthermore, Etsy's active buyer base grew modestly by 0.9% to 96.4 million, while the number of active sellers on the platform saw a more substantial increase of 15% to 9.1 million. This disparity highlights the challenges Etsy faces in expanding its customer base in a competitive post-pandemic market.
Etsy's Stock Price and Market Capitalization
Etsy, Inc. (ETSY) experienced a significant drop in its stock price during Thursday morning trading, following the release of its quarterly earnings which did not meet expectations. The e-commerce retailer's shares fell by 14.4% to $59.69 around noon ET, marking a decrease of up to 19% earlier in the session, reaching its lowest intraday level in four years. This downturn came after the company announced its earnings after the market closed on Wednesday. Despite the number of active buyers on Etsy's platform increasing by nearly 2% compared to the first quarter of 2023, the gross merchandise sales (GMS) across the marketplace declined to $2.99 billion from the $3.10 billion reported in the previous year. Etsy's CEO, Josh Silverman, highlighted the company's operation within a "challenging environment," noting that consumers are increasingly opting for the least expensive options for many products.
ETSY's stock price is currently $59.28, experiencing a significant decrease of approximately 15%, with a change of -$10.46. Today, the stock fluctuated between a low of $56.6 and a high of $60.96. Over the past year, ETSY's stock has seen a high of $102.81 and has now reached its lowest at $56.6. The company's market capitalization stands at roughly $6.95 billion, with a trading volume of about 19.31 million shares on the NASDAQ exchange. This financial turbulence reflects the broader challenges faced by Etsy in maintaining its growth trajectory and adapting to the evolving consumer landscape, especially in a post-pandemic world where consumer spending habits have shifted significantly.
Etsy's Stock Drops 8% Following Q4 EPS Miss
Etsy (NASDAQ:ETSY) saw its shares decline by more than 8% pre-market today, following the release of its fourth-quarter earnings which did not meet the expectations set by analysts.
The online marketplace reported earnings per share (EPS) of $0.62, falling short of the expected $0.77. However, its revenue reached $842.3 million, exceeding the forecast of $827.67 million.
For the upcoming first quarter of 2024, Etsy anticipates a slight year-over-year dip in Gross Merchandise Sales (GMS), projected to be in the low single-digit percentage range.
Additionally, the company estimates the take rate for the first quarter to range between 21% and 21.5%, with an expected adjusted EBITDA margin of about 26%.
Over the full year, Etsy is optimistic that revenue growth will outpace GMS growth. The anticipated full-year take rate is expected to be in line with or higher than the first quarter's projections.
Etsy Upgraded at Wolfe Research
Wolfe Research analysts upgraded Etsy (NASDAQ:ETSY) from Peerperform to Outperform with a $100.00 price target. Despite a year-to-date decline in Etsy's stock, the analysts see potential for growth recovery in the double digits as macro conditions improve, which could drive high-teens EBITDA growth.
This projection is based on expectations of higher discretionary consumer spending and cost savings, regardless of when the macro conditions improve.
The analysts believe Etsy's shares could trade at a mid-teens EBITDA multiple if growth rates reaccelerate to double digits, alongside margin expansion. Historically, Etsy's multiples averaged around 22x before the COVID pandemic, with growth rates ranging from 15% to 25%.
Etsy Stock Plunges 13% Following Q2 Earnings
Etsy (NASDAQ:ETSY) experienced a nearly 13% decline intra-day today after reporting Q2 earnings that fell short of expectations.
The company posted an EPS of 45 cents on revenue of $628.9 million. While the EPS exceeded the Street estimate of 42 cents, the revenue was slightly below the expected $618.6 million. The Gross Merchandise Value (GMV) for the quarter amounted to $3.01 billion, showing a decline of 0.6% year-over-year.
Despite the revenue and profit per share beating expectations, the GMV decrease caused concern among investors. However, Etsy's marketplace still achieved an all-time high in active buyers during the second quarter, which highlights the company's brand relevance and its ability to create opportunities for sellers.
Looking ahead to the current quarter, the company has provided guidance with a midpoint revenue projection of $627.5 million, which falls below the Street estimate of $632.4 million. Additionally, the GMV is projected to be $3.025 billion, again slightly below the Street's estimate of $3.07 billion.
Etsy Stock Plunges 13% Following Q2 Earnings
Etsy (NASDAQ:ETSY) experienced a nearly 13% decline intra-day today after reporting Q2 earnings that fell short of expectations.
The company posted an EPS of 45 cents on revenue of $628.9 million. While the EPS exceeded the Street estimate of 42 cents, the revenue was slightly below the expected $618.6 million. The Gross Merchandise Value (GMV) for the quarter amounted to $3.01 billion, showing a decline of 0.6% year-over-year.
Despite the revenue and profit per share beating expectations, the GMV decrease caused concern among investors. However, Etsy's marketplace still achieved an all-time high in active buyers during the second quarter, which highlights the company's brand relevance and its ability to create opportunities for sellers.
Looking ahead to the current quarter, the company has provided guidance with a midpoint revenue projection of $627.5 million, which falls below the Street estimate of $632.4 million. Additionally, the GMV is projected to be $3.025 billion, again slightly below the Street's estimate of $3.07 billion.
Etsy Upgraded at Piper Sandler as Active Buyer Growth is Expected to Reaccelerate
Etsy (NASDAQ:ETSY) stock received an upgrade from Piper Sandler, who raised it to Overweight from Neutral and increased its price target to $140 from $135. This upgrade resulted in more than 3% gain intra-day today.
According to Piper Sandler, the company's active buyer growth is expected to "reaccelerate over the medium-term, powering continued share gains." Piper's 45th survey on Generation Z showed that Etsy is among the preferred websites for this particular group.
The firm believes that the core marketplace strengths of sustainability, intention, and personalization align well with the core values of Gen Z and millennials. With over 150 million SKUs and a significant focus on personalization, Etsy differentiates itself from other retailers and marketplaces. The firm also noted that Etsy has made significant progress in reactivating its 100 million lapsed buyers, which is expected to drive stronger active buyer results in the coming quarters.
Etsy Shares Drop 9% on Weaker May Consumer Spending
Etsy, Inc. (NASDAQ:ETSY) shares closed more than 9% lower on Thursday following a price target cut by Oppenheimer analysts.
The analysts lowered their price target to $120 from $140 on weaker May conversion data but maintained their Outperform on the long-term market position.
The analysts said the regression of third-party data indicates weaker Q2 on lower conversion, noting a 4% decline in site visits (same as in Q1), but a 20% decline in outgoing payments traffic (vs. 5% year-over-year growth in Q1). As such, their regression model implies gross merchandise sales (GMS) 12% below the Street estimate and marketplace revenue 6% below the Street estimate.
Despite weaker 2022 GMS, Oppenheimer believes the company is maintaining its COVID-19 bump in active buyers and total spending, expecting organic GMS to decline 6% in 2022, but accelerate to a growth of 19% by 2024.
As inflation rates continue to rise, the analysts expect weaker consumer spending in the coming months but remain optimistic about the company's ability to remain an industry leader and attain market share.
