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Why Is Etsy (ETSY) Up 23% Since Last Earnings Report?
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A month has gone by since the last earnings report for Etsy (ETSY - Free Report) . Shares have added about 23% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Etsy due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Etsy reported third-quarter 2023 earnings of 64 cents per share, beating the Zacks Consensus Estimate by 30.61%. The bottom line reflects a year-over-year increase of 10.3%.
Revenues advanced 7% year over year to $636.3 million. The figure beat the Zacks Consensus Estimate by 1.04%. Top-line growth was driven by accelerating services revenues. Strong momentum across active sellers and reactivated buyers remained positive.
Top Line in Detail
Marketplace revenues were $460.92 million (72.4% of the total revenues), up 3.9% from the year-ago quarter’s level, driven by the solid momentum across buyers. ETSY acquired 6.1 million new buyers, which was a major positive. The total number of active buyers on Etsy’s marketplace stood at 91.6 million, which increased 4% year over year.
Services revenues were $175.38 million (27.6% of the total revenues), up 16.2% on a year-over-year basis. Etsy ads acted as a key driver of revenue growth.
Quarterly Specifics
Etsy’s active buyer base increased 3.4% from the prior-year quarter’s figure to 97.34 million, which came ahead of the consensus mark of 96.6 million.
The active seller base was pegged at 8.8 million, up 19% year over year. The figure topped the consensus mark of 8.37 million. Increased investments to provide tools and insights for sustainable pricing strategies for sellers had a positive effect on seller base growth.
ETSY witnessed solid momentum in buyer reactivation. Reactivated buyers were six million, up 19% year over year.
Gross merchandise sales (GMS) of $3.03 billion were up 1.2% on a reported basis and largely flat on a currency-neutral basis from the prior-year quarter. The reported figure surpassed the Zacks Consensus Estimate of $3.02 billion.
The Etsy marketplace’s GMS was $2.7 billion, up 1% and down 0.3% on a reported basis and a currency-neutral basis, respectively, from the year-ago quarter’s figure.
GMS Ex-U.S. domestic for the Etsy marketplace rose 7% from the prior-year quarter’s figure on a currency-neutral basis and accounted for 47% of the total GMS.
Operating Details
In third-quarter 2023, the gross margin was 70.3%, which contracted 40 basis points year over year.
Total operating expenses were $358.92 million, down 73.9% from the prior-year quarter. As a percentage of revenues, the figure contracted to 56.4% from 231.3% in the year-ago quarter.
Consequently, ETSY reported an operating loss of $0.89 million compared with an operating income of $954.78 million reported in the prior-year quarter.
Balance Sheet & Cash Flows
As of Sep 30, 2023, cash and cash equivalents totaled $741.96 million, which decreased from $841.51 million as of Jun 30, 2023.
Short-term investments were $234.93 million, down from $235.3 million in the previous quarter.
Long-term debt stood at $2.28 billion at the end of the third quarter, which remained flat compared with the figure at the end of the prior quarter.
In third-quarter 2023, the company generated $218.51 million in cash from operations, up from $136.27 million in the previous quarter.
Guidance
For fourth-quarter 2023, Etsy anticipates the take rate to be approximately 20.8%, down slightly on a sequential basis due to normal seasonality. This can be used to estimate revenue range for the quarter.
GMS is expected to decline in the low-single-digit range on a year-over-year basis. However, if trends worsen, that could become a mid-single-digit decline, and if trends improve, GMS could be flat or even up slightly year over year.
The adjusted EBITDA margin is expected between 26% and 27%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -9.92% due to these changes.
VGM Scores
At this time, Etsy has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Etsy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Etsy is part of the Zacks Internet - Services industry. Over the past month, Alphabet Inc. (GOOG - Free Report) , a stock from the same industry, has gained 4.2%. The company reported its results for the quarter ended September 2023 more than a month ago.
Alphabet Inc. reported revenues of $64.05 billion in the last reported quarter, representing a year-over-year change of +11.9%. EPS of $1.55 for the same period compares with $1.06 a year ago.
For the current quarter, Alphabet Inc. is expected to post earnings of $1.60 per share, indicating a change of +52.4% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.1% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Alphabet Inc. Also, the stock has a VGM Score of A.
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Why Is Etsy (ETSY) Up 23% Since Last Earnings Report?
A month has gone by since the last earnings report for Etsy (ETSY - Free Report) . Shares have added about 23% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Etsy due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
ETSY's Q3 Earnings Beat Estimates, Revenues Increase Y/Y
Etsy reported third-quarter 2023 earnings of 64 cents per share, beating the Zacks Consensus Estimate by 30.61%. The bottom line reflects a year-over-year increase of 10.3%.
Revenues advanced 7% year over year to $636.3 million. The figure beat the Zacks Consensus Estimate by 1.04%. Top-line growth was driven by accelerating services revenues. Strong momentum across active sellers and reactivated buyers remained positive.
Top Line in Detail
Marketplace revenues were $460.92 million (72.4% of the total revenues), up 3.9% from the year-ago quarter’s level, driven by the solid momentum across buyers. ETSY acquired 6.1 million new buyers, which was a major positive. The total number of active buyers on Etsy’s marketplace stood at 91.6 million, which increased 4% year over year.
Services revenues were $175.38 million (27.6% of the total revenues), up 16.2% on a year-over-year basis. Etsy ads acted as a key driver of revenue growth.
Quarterly Specifics
Etsy’s active buyer base increased 3.4% from the prior-year quarter’s figure to 97.34 million, which came ahead of the consensus mark of 96.6 million.
The active seller base was pegged at 8.8 million, up 19% year over year. The figure topped the consensus mark of 8.37 million. Increased investments to provide tools and insights for sustainable pricing strategies for sellers had a positive effect on seller base growth.
ETSY witnessed solid momentum in buyer reactivation. Reactivated buyers were six million, up 19% year over year.
Gross merchandise sales (GMS) of $3.03 billion were up 1.2% on a reported basis and largely flat on a currency-neutral basis from the prior-year quarter. The reported figure surpassed the Zacks Consensus Estimate of $3.02 billion.
The Etsy marketplace’s GMS was $2.7 billion, up 1% and down 0.3% on a reported basis and a currency-neutral basis, respectively, from the year-ago quarter’s figure.
GMS Ex-U.S. domestic for the Etsy marketplace rose 7% from the prior-year quarter’s figure on a currency-neutral basis and accounted for 47% of the total GMS.
Operating Details
In third-quarter 2023, the gross margin was 70.3%, which contracted 40 basis points year over year.
Total operating expenses were $358.92 million, down 73.9% from the prior-year quarter. As a percentage of revenues, the figure contracted to 56.4% from 231.3% in the year-ago quarter.
Consequently, ETSY reported an operating loss of $0.89 million compared with an operating income of $954.78 million reported in the prior-year quarter.
Balance Sheet & Cash Flows
As of Sep 30, 2023, cash and cash equivalents totaled $741.96 million, which decreased from $841.51 million as of Jun 30, 2023.
Short-term investments were $234.93 million, down from $235.3 million in the previous quarter.
Long-term debt stood at $2.28 billion at the end of the third quarter, which remained flat compared with the figure at the end of the prior quarter.
In third-quarter 2023, the company generated $218.51 million in cash from operations, up from $136.27 million in the previous quarter.
Guidance
For fourth-quarter 2023, Etsy anticipates the take rate to be approximately 20.8%, down slightly on a sequential basis due to normal seasonality. This can be used to estimate revenue range for the quarter.
GMS is expected to decline in the low-single-digit range on a year-over-year basis. However, if trends worsen, that could become a mid-single-digit decline, and if trends improve, GMS could be flat or even up slightly year over year.
The adjusted EBITDA margin is expected between 26% and 27%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -9.92% due to these changes.
VGM Scores
At this time, Etsy has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Etsy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Etsy is part of the Zacks Internet - Services industry. Over the past month, Alphabet Inc. (GOOG - Free Report) , a stock from the same industry, has gained 4.2%. The company reported its results for the quarter ended September 2023 more than a month ago.
Alphabet Inc. reported revenues of $64.05 billion in the last reported quarter, representing a year-over-year change of +11.9%. EPS of $1.55 for the same period compares with $1.06 a year ago.
For the current quarter, Alphabet Inc. is expected to post earnings of $1.60 per share, indicating a change of +52.4% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.1% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Alphabet Inc. Also, the stock has a VGM Score of A.