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Why Is Etsy (ETSY) Down 3.6% Since Last Earnings Report?
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It has been about a month since the last earnings report for Etsy (ETSY - Free Report) . Shares have lost about 3.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Etsy due for a breakout? 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 drivers.
Etsy reported fourth-quarter 2023 earnings of 62 cents per share, which declined 19.5% year over year.
In the reported quarter, the company’s net income, totaling $83.3 million, was hurt by restructuring and other exit costs of $27 million.
The adjusted bottom-line figure was 78 cents per share, which was in line with the Zacks Consensus Estimate.
Revenues advanced 4.3% year over year to $842.32 million. The figure beat the Zacks Consensus Estimate by 1.8%.
Top-line growth was driven by accelerating marketplace and service revenues.
Strong momentum across active sellers and reactivated buyers remained positive.
Top Line in Detail
Marketplace revenues were $615.8 million (73.1% of the total revenues), up 2.6% from the year-ago quarter’s level, driven by solid momentum across buyers. ETSY acquired 8.4 million new buyers, which was a major positive. The total number of active buyers on Etsy’s marketplace stood at 92 million, which increased 3% year over year.
Service revenues were $226.53 million (26.9% of the total revenues), up 9.4% on a year-over-year basis. Etsy ads acted as a key driver for revenue growth.
Quarterly Specifics
Etsy’s active buyer base increased 1.5% from the prior-year quarter’s figure to 96.48 million, which missed the consensus mark of 97.41 million.
The active seller base stood at 9.04 million, up 21% year over year. The figure topped the consensus mark of 8.81 million. Increasing investments to support sellers with new tools and insights, including the Etsy Share & Save program and a new 'Pricing Guide' for sustainable pricing strategies, had a positive effect on seller base growth.
ETSY witnessed solid momentum in buyer reactivation. Reactivated buyers were 9.7 million, up 13% year over year.
Gross merchandise sales (GMS) of $4.01 billion were down 0.7% on a reported basis and 1.6% on a currency-neutral basis from the prior-year quarter. The reported figure surpassed the Zacks Consensus Estimate of $3.97 billion.
The Etsy marketplace’s GMS was $3.6 billion, down 1.4% on a reported basis from the year-ago quarter’s figure.
GMS Ex-U.S. domestic for the Etsy marketplace rose 4% from the prior-year quarter’s figure on a currency-neutral basis and accounted for 47% of the total GMS.
Operating Details
In fourth-quarter 2023, gross margin was 69.6%, which contracted 240 basis points year over year.
Total operating expenses were $471.1 million, up 6.6% from the prior-year quarter. As a percentage of revenues, the figure expanded to 55.9% from 54.8% in the year-ago quarter.
Consequently, ETSY reported an operating income of $115.46 million compared with an operating income of $139.34 million reported in the prior-year quarter.
Balance Sheet & Cash Flows
As of Dec 31, 2023, cash and cash equivalents totaled $914.32 million, which increased from $741.96 million as of Sep 30, 2023.
Short-term investments were $236.12 million, up from $234.93 million in the previous quarter.
Long-term debt stood at $2.28 billion at the end of the fourth quarter, which remained flat compared with the figure at the end of the prior quarter.
In fourth-quarter 2023, the company generated $295.1 million in cash from operations, up from $218.5 million in the previous quarter.
Guidance
For first-quarter 2024, Etsy anticipates the take rate to be between 21% and 21.5%. This can be used to estimate the 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 year over year.
The adjusted EBITDA margin is expected to be approximately 26%.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -12.95% due to these changes.
VGM Scores
Currently, Etsy has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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 belongs to the Zacks Internet - Services industry. Another stock from the same industry, DoorDash, Inc. (DASH - Free Report) , has gained 12.6% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
DoorDash reported revenues of $2.3 billion in the last reported quarter, representing a year-over-year change of +26.7%. EPS of -$0.39 for the same period compares with -$0.63 a year ago.
DoorDash is expected to post a loss of $0.07 per share for the current quarter, representing a year-over-year change of +82.9%. Over the last 30 days, the Zacks Consensus Estimate has changed +19.2%.
DoorDash has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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Why Is Etsy (ETSY) Down 3.6% Since Last Earnings Report?
It has been about a month since the last earnings report for Etsy (ETSY - Free Report) . Shares have lost about 3.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Etsy due for a breakout? 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 drivers.
ETSY's Q4 Earnings Meet Estimates, Revenues Increase Y/Y
Etsy reported fourth-quarter 2023 earnings of 62 cents per share, which declined 19.5% year over year.
In the reported quarter, the company’s net income, totaling $83.3 million, was hurt by restructuring and other exit costs of $27 million.
The adjusted bottom-line figure was 78 cents per share, which was in line with the Zacks Consensus Estimate.
Revenues advanced 4.3% year over year to $842.32 million. The figure beat the Zacks Consensus Estimate by 1.8%.
Top-line growth was driven by accelerating marketplace and service revenues.
Strong momentum across active sellers and reactivated buyers remained positive.
Top Line in Detail
Marketplace revenues were $615.8 million (73.1% of the total revenues), up 2.6% from the year-ago quarter’s level, driven by solid momentum across buyers. ETSY acquired 8.4 million new buyers, which was a major positive. The total number of active buyers on Etsy’s marketplace stood at 92 million, which increased 3% year over year.
Service revenues were $226.53 million (26.9% of the total revenues), up 9.4% on a year-over-year basis. Etsy ads acted as a key driver for revenue growth.
Quarterly Specifics
Etsy’s active buyer base increased 1.5% from the prior-year quarter’s figure to 96.48 million, which missed the consensus mark of 97.41 million.
The active seller base stood at 9.04 million, up 21% year over year. The figure topped the consensus mark of 8.81 million. Increasing investments to support sellers with new tools and insights, including the Etsy Share & Save program and a new 'Pricing Guide' for sustainable pricing strategies, had a positive effect on seller base growth.
ETSY witnessed solid momentum in buyer reactivation. Reactivated buyers were 9.7 million, up 13% year over year.
Gross merchandise sales (GMS) of $4.01 billion were down 0.7% on a reported basis and 1.6% on a currency-neutral basis from the prior-year quarter. The reported figure surpassed the Zacks Consensus Estimate of $3.97 billion.
The Etsy marketplace’s GMS was $3.6 billion, down 1.4% on a reported basis from the year-ago quarter’s figure.
GMS Ex-U.S. domestic for the Etsy marketplace rose 4% from the prior-year quarter’s figure on a currency-neutral basis and accounted for 47% of the total GMS.
Operating Details
In fourth-quarter 2023, gross margin was 69.6%, which contracted 240 basis points year over year.
Total operating expenses were $471.1 million, up 6.6% from the prior-year quarter. As a percentage of revenues, the figure expanded to 55.9% from 54.8% in the year-ago quarter.
Consequently, ETSY reported an operating income of $115.46 million compared with an operating income of $139.34 million reported in the prior-year quarter.
Balance Sheet & Cash Flows
As of Dec 31, 2023, cash and cash equivalents totaled $914.32 million, which increased from $741.96 million as of Sep 30, 2023.
Short-term investments were $236.12 million, up from $234.93 million in the previous quarter.
Long-term debt stood at $2.28 billion at the end of the fourth quarter, which remained flat compared with the figure at the end of the prior quarter.
In fourth-quarter 2023, the company generated $295.1 million in cash from operations, up from $218.5 million in the previous quarter.
Guidance
For first-quarter 2024, Etsy anticipates the take rate to be between 21% and 21.5%. This can be used to estimate the 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 year over year.
The adjusted EBITDA margin is expected to be approximately 26%.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -12.95% due to these changes.
VGM Scores
Currently, Etsy has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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 belongs to the Zacks Internet - Services industry. Another stock from the same industry, DoorDash, Inc. (DASH - Free Report) , has gained 12.6% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
DoorDash reported revenues of $2.3 billion in the last reported quarter, representing a year-over-year change of +26.7%. EPS of -$0.39 for the same period compares with -$0.63 a year ago.
DoorDash is expected to post a loss of $0.07 per share for the current quarter, representing a year-over-year change of +82.9%. Over the last 30 days, the Zacks Consensus Estimate has changed +19.2%.
DoorDash has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.