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Why Is Etsy (ETSY) Down 7.8% 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 7.8% 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 catalysts.
ETSY's Q2 Earnings Miss Estimates, Revenues Increase Y/Y
Etsy reported second-quarter 2024 earnings of 41 cents per share, missing the Zacks Consensus Estimate by 10.9%. The bottom-line figure reflects a year-over-year decrease of 8.9%.
Revenues advanced 3% year over year to $647.81 million. The figure beat the Zacks Consensus Estimate by 2.3%.
Top-line growth was driven by accelerating Marketplace revenues.
Strong momentum across active sellers and reactivated buyers remained positive.
Top Line in Detail
Marketplace revenues were $470.38 million (72.6% of the total revenues), up 3.8% from the year-ago quarter’s level. The growth was primarily driven by strengthening payments and transaction fee revenue from Offsite Ads. Also, ETSY acquired 5.6 million new buyers, which was a major positive. The total number of active buyers on Etsy’s marketplace stood at 91.5 million, which increased 1% year over year.
Services revenues were $177.43 million (27.4% of the total revenues), up 0.9% on a year-over-year basis.
Quarterly Specifics
Etsy’s active buyer base increased 0.4% from the prior-year quarter’s figure to 96.6 million, which missed the consensus mark of 97.2 million.
The active seller base stood at 8.8 million, up 5.9% year over year. The figure missed the consensus mark of 9.6 million. Increasing investments to support sellers with a targeted marketing campaign to promote the availability of a seller financing program offered via a third-party partner had a positive effect on seller base growth.
ETSY witnessed solid momentum in buyer reactivation. Reactivated buyers were 6.4 million, up 8.5% year over year.
Gross merchandise sales (GMS) of $2.95 billion were down 2.1% on a reported basis and 1.9% on a currency-neutral basis from the prior-year quarter. The reported figure beat the Zacks Consensus Estimate of $2.92 billion.
The Etsy marketplace’s GMS was $2.5 billion, down 3.2% on a reported basis from the year-ago quarter’s figure.
Operating Details
In the second quarter of 2024, the gross margin was 71.6%, which expanded 160 basis points year over year.
Total operating expenses were $393.55 million, down 11.1% from the prior-year quarter. As a percentage of revenues, the figure contracted to 60.8% from 70.4% in the year-ago quarter.
Consequently, ETSY reported an operating income of $70.2 million compared with an operating loss of $2.4 million reported in the prior-year quarter.
Balance Sheet
As of Jun 30, 2024, cash and cash equivalents totaled $759.21 million, which decreased from $788.84 million as of Mar 31, 2024.
Short-term investments were $240.68 million, down from $254.88 million in the previous quarter.
Long-term debt stood at $2.29 billion at the end of the second quarter, up from $2.28 billion at the end of the prior quarter.
Guidance
For the third quarter of 2024, Etsy anticipates the take rate to be similar to the actual second quarter 2024 figure of 22%.
GMS is expected to decline in the low single-digit range on a year-over-year basis.
The adjusted EBITDA margin is expected to be 27%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -10.16% due to these changes.
VGM Scores
Currently, Etsy has a nice Growth Score of B, 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 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.
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Why Is Etsy (ETSY) Down 7.8% Since Last Earnings Report?
It has been about a month since the last earnings report for Etsy (ETSY - Free Report) . Shares have lost about 7.8% 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 catalysts.
ETSY's Q2 Earnings Miss Estimates, Revenues Increase Y/Y
Etsy reported second-quarter 2024 earnings of 41 cents per share, missing the Zacks Consensus Estimate by 10.9%. The bottom-line figure reflects a year-over-year decrease of 8.9%.
Revenues advanced 3% year over year to $647.81 million. The figure beat the Zacks Consensus Estimate by 2.3%.
Top-line growth was driven by accelerating Marketplace revenues.
Strong momentum across active sellers and reactivated buyers remained positive.
Top Line in Detail
Marketplace revenues were $470.38 million (72.6% of the total revenues), up 3.8% from the year-ago quarter’s level. The growth was primarily driven by strengthening payments and transaction fee revenue from Offsite Ads. Also, ETSY acquired 5.6 million new buyers, which was a major positive. The total number of active buyers on Etsy’s marketplace stood at 91.5 million, which increased 1% year over year.
Services revenues were $177.43 million (27.4% of the total revenues), up 0.9% on a year-over-year basis.
Quarterly Specifics
Etsy’s active buyer base increased 0.4% from the prior-year quarter’s figure to 96.6 million, which missed the consensus mark of 97.2 million.
The active seller base stood at 8.8 million, up 5.9% year over year. The figure missed the consensus mark of 9.6 million. Increasing investments to support sellers with a targeted marketing campaign to promote the availability of a seller financing program offered via a third-party partner had a positive effect on seller base growth.
ETSY witnessed solid momentum in buyer reactivation. Reactivated buyers were 6.4 million, up 8.5% year over year.
Gross merchandise sales (GMS) of $2.95 billion were down 2.1% on a reported basis and 1.9% on a currency-neutral basis from the prior-year quarter. The reported figure beat the Zacks Consensus Estimate of $2.92 billion.
The Etsy marketplace’s GMS was $2.5 billion, down 3.2% on a reported basis from the year-ago quarter’s figure.
Operating Details
In the second quarter of 2024, the gross margin was 71.6%, which expanded 160 basis points year over year.
Total operating expenses were $393.55 million, down 11.1% from the prior-year quarter. As a percentage of revenues, the figure contracted to 60.8% from 70.4% in the year-ago quarter.
Consequently, ETSY reported an operating income of $70.2 million compared with an operating loss of $2.4 million reported in the prior-year quarter.
Balance Sheet
As of Jun 30, 2024, cash and cash equivalents totaled $759.21 million, which decreased from $788.84 million as of Mar 31, 2024.
Short-term investments were $240.68 million, down from $254.88 million in the previous quarter.
Long-term debt stood at $2.29 billion at the end of the second quarter, up from $2.28 billion at the end of the prior quarter.
Guidance
For the third quarter of 2024, Etsy anticipates the take rate to be similar to the actual second quarter 2024 figure of 22%.
GMS is expected to decline in the low single-digit range on a year-over-year basis.
The adjusted EBITDA margin is expected to be 27%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -10.16% due to these changes.
VGM Scores
Currently, Etsy has a nice Growth Score of B, 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 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.