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Evaluating Etsy’s Top Line Trends in 2018

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The first nine months of 2018

In the last 11 quarters, Etsy (ETSY) has topped revenue estimates ten times and missed estimates just once.

Etsy beat analysts’ consensus top line estimate by 1.3% in the first quarter of 2018 and by 4.2% in the second quarter. In the third quarter, its revenue marginally beat the estimate.

On the other hand, in the third quarter, revenue grew 41.3% on a YoY (year-over-year) basis. Its top line grew ~25.0% and 30.2% YoY in the first and second quarters, respectively.

For the fourth quarter, analysts expect Etsy’s revenue to jump 43% YoY to $194.9 million. Etsy hasn’t provided an outlook for the fourth quarter.

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Wayfair (W) beat analysts’ top line estimates in the first three quarters of fiscal 2018. On a YoY basis, its revenue rose 46.1%, 47.3%, and 42.4% in the first, second, and third quarters, respectively. Its top line is being driven by marketing investments and better product assortment, improvements in its logistics network, and international expansion.

Overstock (OSTK) missed analysts’ sales projection by 1.9% in the first quarter but topped the sales projection by 1.9% in the second quarter. In the third quarter, its sales fell marginally short of the estimate. However, the company has reported YoY revenue growth in all three quarters of 2018. Its top line is being driven by higher marketing investments.

What’s driving Etsy’s revenue?

Etsy’s revenue growth is being driven by strategic endeavors and its recent increases in seller fees, especially in the third quarter. Etsy has taken up initiatives such as cost cuts and the improvement of its digital platform. The mobile platform remains its biggest catalyst. In the first, second, and third quarters, its mobile GMS (gross merchandise sales) rose 31.0%, 32.0%, and 30.0%, respectively, mainly due to the revamping of its mobile shopping platform and the resultant higher traffic.

Etsy is working on driving revenue from repeat customers. It can lower its advertisement spending by increasing orders from repeat customers. Its GMS from repeat buyers made up 83% of its overall GMS in the third quarter.

Due to the hike in its seller fees, the company’s management has revised its guidance for 2018. It now expects its revenue to rise 35%–36% compared to the previous forecast of 33%–35%. Its GMS are now expected to rise 19%–20% compared to the earlier projected range of 18%–20%.

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