Stock rises ~15%
Online retailer Etsy (ETSY) posted its 4Q17 results on February 27, 2018, after the market close. The company’s revenue of $136.3 million and adjusted EPS (earnings per share) came in at $0.15 as against analysts’ estimate of $132.6 million and $0.09, respectively. The company also gave upbeat guidance for 2018, which includes a 21% to 23% increase in revenue. For 2018, analysts estimate revenue growth of 19%.
Shares of Etsy jumped ~15% after the 4Q17 earnings announcement in the after-market session. In 2017, the stock price was up 73.6% compared with the 19.4% gain in the S&P 500 Index (SPX-Index). On a YTD (year-to-date) basis as of February 27, 2018, Etsy stock is up 2.8%.
However, this price movement was lower when compared with its peers Shopify (SHOP) and Wayfair (W), which posted gains of 135.6% and 129.0%, respectively, in 2017. On a YTD basis as of February 27, 2018, Shopify is up 36.3% to $137.66, whereas Wayfair is down ~5% to $76.27. Wayfair stock lost nearly 22.7% of its value after reporting 4Q17 results on February 22, 2018. Despite the rise in revenue, it was the increasing loss per share that sent investors into a tizzy.
Etsy’s turnaround efforts
2017 was a year of far-reaching changes for Etsy. The company took extensive measures like cutting costs, overhauling management, and investing to improve its digital platform to enhance its financial performance. Also, to improve both the customer and seller experience, Etsy is working on providing newer services and tools to both these communities.
All these initiatives seem to be headed in the right direction given the company’s stellar 4Q17 performance. Management added that it saw quarterly GMS (gross merchandise sale) exceed $1 billion in 4Q17 for the first time in its operational history.
Following the earnings announcement, out of the 12 analysts covering the stock, 58% recommended a “hold,” 33% recommended a “buy,” and the remaining ~9.0% recommended a “sell.”
Moreover, RBC and Keybanc have raised their target price for Etsy. RBC has upped it to $24 from $18 projected earlier, while Keybanc raised it to $28 from $26 projected earlier.
This series will offer in-depth analysis of Etsy’s results.