Etsy (ETSY) Stock Jumps 11% on Earnings Optimism

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While an e-commerce specialty focusing on crafts and related goods doesn’t seem like a relevant force in the current economic environment, Etsy (NASDAQ:ETSY) proved doubters wrong. The online marketplace produced better-than-expected results for the third quarter despite significant macroeconomic headwinds. Subsequently, ETSY stock jumped 11% in the morning session before adding even more gains in the afternoon session.

For the headline numbers, Etsy delivered adjusted earnings per share of 58 cents. This figure came well above Wall Street’s consensus target of 36 cents. On the top line, the e-commerce firm rang up $594.5 million in revenue, beating out the $565 million forecast that covering analysts anticipated. Q3’s tally represented an 11.7% lift from the year-ago period, thanks to the company’s transaction fee hike.

According to Barron’s, gross merchandise sales came out to $3 billion, which slipped 3.3% (or 0.7% adjusted for currency fluctuations). However, this stat represented the high end of management’s projected range of $2.8 billion to $3 billion.

For the current fourth quarter:

“Etsy projects gross merchandise sales of $3.6 billion to $4 billion, with revenue of $700 million to $780 million, about in line with the Street consensus at $742 million. Etsy sees fourth-quarter adjusted Ebitda margin of 27%, down a percentage point from the second quarter.”

ETSY Stock Moves Against the Grain

In an accompanying press release for the e-commerce specialist’s Q3 report, CEO Josh Silverman announced that “Etsy’s business has remained strong in a volatile environment.” Notably, ETSY stock swung up double digits while the major equity indices posted disappointingly mixed results.

Silverman continued, noting that “we believe our sustained performance is a testament to Etsy’s unique position in e-commerce where, in a world of mass commodities supplied by companies obsessed with speed and scale, Etsy is the antidote.”

Certainly, ETSY stock moves against the grain. While e-commerce as an industry helped the U.S. and much of the world cope with the disastrous Covid-19 pandemic, as a percentage of total retail sales, online transactions peaked in the second quarter of 2020. Between the first and second quarters of this year, this metric picked up to 14.5% from 14.3%. Still, it’s conspicuously below the peak level of 16.4%.

Also, the enthusiasm toward ETSY stock may reflect some normalization in consumer behaviors. Following roughly two years of lockdowns and mitigation measures, the resultant collective cabin fever had people rushing out the door, a phenomenon known as “revenge travel.” However, discretionary spending may be moving back toward the living room.

Still, investors should realize that severe challenges in the consumer economy remain. For the year, ETSY stock is below parity to the tune of 52%.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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