🛒 Is Etsy’s Recent Rise Justified?
General Motors sells stake in Lordstown.
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🔥 Top Movers
🛒 Etsy: Exuberance Justified?
Shares of online vintage items seller Etsy Inc. (ETSY) surged over 16% last Friday after Q4 results crushed expectations. This, despite possible headwinds the business is expected to run into, which poured cold water on the expectations for the current quarter. Can the momentum sustain? (Tweet This)
eCommerce got a serious boost during the pandemic as people were content to stay home and let everything from essential supplies to luxury items be delivered to their doorstep. Any company related to e-commerce, such as Shopify and Etsy, and the like, saw never-before-seen growth levels. As a result, the share price skyrocketed.
As more people get vaccinated, economies re-open, and stepping out of the home comes back into fashion, brick-and-mortar stores are pulling out all stops to woo customers back into their fold. That brought these stratospheric growth rates back to Terra Firma. Shopify fell to a 52-week low recently. Shares of today's protagonist Etsy have also halved from their peak.
Etsy struck gold during the pandemic as people flocked to it to get a hold of masks back in the first wave of the pandemic. Then, in April 2020 alone, Etsy managed to sell 12M masks worth $133M. The by-product being people stayed back to buy items such as garden plants, seeds, sewing materials, and kitchen supplies, creating more business for Etsy.
Starting Q2 2020 until Q2 2021 saw the company report revenue growth above 125% each quarter. In response, the shares climbed 270% in 2020 to end the year at $177.91. While the revenue growth rate didn’t keep pace, shares continued to bounce higher, hitting a peak of $307.75 in November last year.
Make Hay While The Sun Shines
Etsy managed to beat estimates on both revenue and EPS front in Q4.
Key Highlights From Q4:
Revenue: $717M Vs $685M expected (a record)
EPS: $1.11 Vs $0.79 expected
Active Buyers: 96.3M Vs 95.3M expected
Consolidated Gross Merchandise Sale (GMS) was a record $4.2B, a growth of 16.5% Y-o-Y on the back of a strong holiday season. The Etsy marketplace acquired 10M new buyers in Q4, its highest new buyer acquisition since Q4 2020.
Revenue in Q4 grew 16.2% Y-o-Y. However, in the current quarter, Etsy expects revenue of ~$577M, much lower than Wall Street projections of $630M. It also expects GMS to narrow to ~$3.3B, which is certainly lower than the Q4 record and lower still compared to analyst estimates of $3.5B.
The management is unfazed by the moderation in growth rates and expects lower GMS growth in the first half of 2022 - something that will pick up in the second half of the year. Etsy also raised the percentage of the total order amount it charges the sellers. This transaction fee is now at 6.5%, up from 5%. The prior raise in these fees was in 2018 when the company moved it up from 3.5% to 5%.
Shares of Etsy have halved over the last three months. Now, investors seem ready to put that mayhem behind them and happily embrace the record-breaking quarter that the company has just delivered. The sun is shining after quite some time, and it’s time to make some hay, as they say!
ETSY ended at $157.53, up 1.70%.
Company Snapshot 📈
ETSY $157.53 +2.64 (1.70%)
Analyst Ratings (21 Analysts) BUY 71% HOLD 24% SELL 5%
Confidence: Target shares surge as retailer says it can keep growth going beyond the pandemic (TGT +9.84%)
Giving Up: General Motors sells its stake in embattled EV start-up Lordstown Motors (GM -4.71%)
Buffering: Zoom provides disappointing revenue forecast for first quarter and full year (ZM -7.41%)
Later Today 🕒
Dollar Tree Inc. Earnings (DLTR)
Snowflake Inc. Earnings (SNOW)
American Eagle Outfitters Inc. Earnings (AEO)
Box Inc. Earnings (BOX)
C3.ai Inc. Earnings (AI)
Coupang Inc. Earnings (CPNG)
Paysafe Ltd. Earnings (PSFE)
Tidewater Inc. Earnings (TDW)
6:45 PM: ADP Employment Report
8:30 PM: Fed Chair Jerome Powell Testifies at House Committee
Today's Market Terminology: Vulture Fund
A Vulture Fund is a fund that buys distressed debt of commercial companies or sovereign nations at cheap prices and then often sues them for the entire value of the debt. The funds profit from the debt of failing companies or poor nations
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