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Etsy, Inc. (ETSY - Free Report) is attempting to become profitable for the first time since its IPO in 2015. This Zacks Rank #1 (Strong Buy) is expected to grow sales and earnings by the double digits in 2018.
Etsy is the online market place where people make, sell and buy unique goods. Founded in 2005, it is headquartered in Brooklyn and went IPO in 2015.
Revenue Rises Double Digits in the First Quarter
On May 2, Etsy reported first quarter results and met the Zacks Consensus Estimate of $0.00.
But while investors have been focused on the lack of earnings growth, sales continue to climb.
Revenue was up 18.4% to $96.9 million driven by growth in both Markets and Sellers Services. Markets revenue was up 14.1% due to growth in transaction fee revenue while Seller Services jumped 23.9% year-over-year due to revenue growth in Etsy Payments.
In the quarter, it launched Etsy Studio, it's first new market since 2005. It is trying to target the craft supplies market and believes it can have an edge in that category.
For the year, sales are expected to grow 19% with another 17.7% in 2018.
Management Changes
The company has been under pressure from activist investors to make a profit. In May, Etsy announced that former CEO Chad Dickerson would step down and be replaced by Josh Silverman, who had been a director on the Board since Nov 2016.
Silverman became CEO effective May 3, 2017.
Dickerson had been CEO for six years. Many investors felt a change at the top was needed to move forward.
Staff Layoffs
In order to accelerate the timeframe to profitability, the company has had to make some difficult decisions, including laying off staff.
In May, it announced it would cut 80 positions but by June it had made even more severe cuts, eliminating another 140 positions.
In total, it would see the elimination of about 230 positions, or 22% of the workforce.
The vast majority of the jobs were in marketing, product management and general and administrative positions. Most were in the Brooklyn headquaters.
Enough to Right the Ship?
Cutting expenses is just the first stage.
But analysts are bullish enough that they see significant improvement in earnings by 2018.
Even though Etsy is expected to lose $0.01 in 2017, they are forecast to make $0.17 in 2018. It would be their first profitable year since the 2015 IPO.
Shares Rebound on Turnaround Hopes
Shares are off their 2017 lows on hopes that the management changes and layoffs will result in an earnings turnaround.
Shares are up 27.4% year-to-date, although they still remain down 45% from the 2015 IPO.
For investors who like betting on the underdog, this is a stock to keep on your short list.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Bull of the Day: Etsy (ETSY)
Etsy, Inc. (ETSY - Free Report) is attempting to become profitable for the first time since its IPO in 2015. This Zacks Rank #1 (Strong Buy) is expected to grow sales and earnings by the double digits in 2018.
Etsy is the online market place where people make, sell and buy unique goods. Founded in 2005, it is headquartered in Brooklyn and went IPO in 2015.
Revenue Rises Double Digits in the First Quarter
On May 2, Etsy reported first quarter results and met the Zacks Consensus Estimate of $0.00.
But while investors have been focused on the lack of earnings growth, sales continue to climb.
Revenue was up 18.4% to $96.9 million driven by growth in both Markets and Sellers Services. Markets revenue was up 14.1% due to growth in transaction fee revenue while Seller Services jumped 23.9% year-over-year due to revenue growth in Etsy Payments.
In the quarter, it launched Etsy Studio, it's first new market since 2005. It is trying to target the craft supplies market and believes it can have an edge in that category.
For the year, sales are expected to grow 19% with another 17.7% in 2018.
Management Changes
The company has been under pressure from activist investors to make a profit. In May, Etsy announced that former CEO Chad Dickerson would step down and be replaced by Josh Silverman, who had been a director on the Board since Nov 2016.
Silverman became CEO effective May 3, 2017.
Dickerson had been CEO for six years. Many investors felt a change at the top was needed to move forward.
Staff Layoffs
In order to accelerate the timeframe to profitability, the company has had to make some difficult decisions, including laying off staff.
In May, it announced it would cut 80 positions but by June it had made even more severe cuts, eliminating another 140 positions.
In total, it would see the elimination of about 230 positions, or 22% of the workforce.
The vast majority of the jobs were in marketing, product management and general and administrative positions. Most were in the Brooklyn headquaters.
Enough to Right the Ship?
Cutting expenses is just the first stage.
But analysts are bullish enough that they see significant improvement in earnings by 2018.
Even though Etsy is expected to lose $0.01 in 2017, they are forecast to make $0.17 in 2018. It would be their first profitable year since the 2015 IPO.
Shares Rebound on Turnaround Hopes
Shares are off their 2017 lows on hopes that the management changes and layoffs will result in an earnings turnaround.
Shares are up 27.4% year-to-date, although they still remain down 45% from the 2015 IPO.
Can Etsy compete against its bigger rivals eBay (EBAY - Free Report) and Amazon (AMZN - Free Report) ?
For investors who like betting on the underdog, this is a stock to keep on your short list.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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