Esty Stock Rose 23.7% after Strong Third-Quarter Results



Stock rose

On November 7, Etsy (ETSY) stock rose 23.7% after its third-quarter earnings announcement on November 6. The company’s third-quarter revenues of $150.4 million and adjusted EPS of $0.15 beat the consensus estimates. On a year-over-year basis, the revenues rose 40.2%. However, the adjusted EPS declined 28.6%. Etsy also announced a $200 million stock buyback authorization.

Etsy has been on a roll for quite some time. The company has been focusing on faster search and discovery on its platform. Etsy has been improving trust and reliability for buyers and sellers and providing better tools. The company is ramping up marketing investments. As online shopping gains traction, Etsy’s growth prospects look bright.

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Etsy hiked its seller transaction fee to 5.0% from 3.5%. With the hike, Etsy is looking to accelerate investments in marketing and product innovation. Higher fees helped Etsy record double-digit revenue growth in the third quarter. Etsy’s management raised its revenue guidance for 2018. Management expects revenue growth of 35%–36%. The previous revenue growth guidance was 33%–35%. The gross merchandise sales are projected to grow 19%–20%—compared to the previous forecast of 18%–20%.

Etsy stock has risen 144.5% to $50.01 YTD (year-to-date). As of November 7, Wayfair (W) rose 22.0% to $97.93. Shopify (SHOP) has increased 46.7% YTD to $148.19. On the other hand, eBay (EBAY) has fallen 20.9% to $29.86 YTD.

Analysts’ target price revision

There have been three target price revisions after Etsy’s third-quarter announcement. On November 7, D.A. Davidson increased its target price to $63.00 from $59.00. RBC raised its target price to $52.00 from $45.00, while Stifel increased its target price to $50.00 from $46.00.

Currently, analysts’ 12-month average target price for Etsy is $53.20, which reflects a 6.4% upside to the stock’s price on November 7.

After Etsy’s third-quarter results, 50% of the ten analysts covering the stock recommended a “buy” as of November 7. The remaining analysts recommended a “hold.” None of the analysts recommended a “sell” rating.


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