A month has gone by since the last earnings report for Etsy (ETSY). Shares have added about 5.6% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Etsy Q3 Earnings Miss Estimates, Revenues Beat
Etsy’s third-quarter 2024 revenues advanced 4.1% year over year to $662.4 million. The figure beat the Zacks Consensus Estimate by 1.31%. Top-line growth was driven by accelerating Marketplace revenues.
However, third-quarter 2024 earnings of 45 cents per share missed the Zacks Consensus Estimate by 16.67%. The bottom-line figure reflects a year-over-year decrease of 29.7%.
Etsy announced a stock repurchase program worth $1 billion. In the third-quarter 2024, Etsy repurchased an aggregate of approximately $156 million, or 2.7 million shares, of its common stock.
ETSY’s Top Line Grows Y/Y
Marketplace revenues were $476.1 million (71.9% of the total revenues), up 3.3% from the year-ago quarter’s level. The growth was driven by payment fee revenues. A new seller setup fee and offsite ad fees also contributed to marketplace revenue expansion.
ETSY acquired 5.3 million new buyers, which was a major positive. The total number of active buyers on Etsy’s marketplace stood at 91.2 million, which increased 0.4% year over year.
Services revenues were $186.3 million (28.1% of the total revenues), up 6.2% on a year-over-year basis.
ETSY’s Active User Base Increases Y/Y
Etsy’s active buyer base increased 0.7% from the prior-year quarter’s figure to 96.7 million, which missed the consensus mark of 97.2 million.
The active seller base stood at 8.5 million, down 3.2% year over year. The figure missed the consensus mark of 9.7 million.
ETSY witnessed solid momentum in buyer reactivation. Reactivated buyers were 6.4 million, up 5.6% year over year.
Gross merchandise sales (GMS) of $2.92 billion were down 4.1% on a reported basis and 4.4% on a currency-neutral basis from the prior-year quarter. The reported figure missed the Zacks Consensus Estimate of $2.97 billion.
The Etsy marketplace’s Gross Merchandise Sales (GMS) was $2.5 billion, down 6% on a reported basis from the year-ago quarter’s figure and 6.3% on a currency-neutral basis.
ETSY’s Operating Expenses Rise Y/Y
In the third quarter of 2024, total operating expenses were $389.95 million, up 8.6% from the prior-year quarter. As a percentage of revenues, the figure expanded to 58.9% from 56.4% in the year-ago quarter.
Marketing expenses increased 22.1% year over year to $196.5 million. As a percentage of sales, marketing expenses increased 440 basis points (bps) year over year to 29.7%.
Product development expenses decreased 5.9% year over year to $107.3 million. As a percentage of sales, product development expenses decreased 170 bps year over year to 16.2%.
General and administrative (G&A) expenses increased 2.5% year over year to $86.2 million. As a percentage of sales, G&A expenses decreased by 20 bps to 13%.
Consequently, ETSY reported an operating income of $86.8 million compared with an operating income of $88.6 million reported in the prior-year quarter.
ETSY’s Balance Sheet Shows Improvement
As of Sept. 30, 2024, cash and cash equivalents totaled $818.94 million, which increased from $759.21 million as of June 30, 2024.
Short-term investments were $226.02 million, down from $240.68 million in the previous quarter.
Long-term debt stood at $2.29 billion at the end of the third quarter, unchanged from the figure reported at the end of the prior quarter.
ETSY’s Q4 Guidance Unimpressive
For the fourth quarter of 2024, Etsy anticipates the take rate to be 22.3%.
GMS is expected to decline in a low to mid-single-digit percentage range on a year-over-year basis.
The adjusted EBITDA margin is expected to be 28-29%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
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 top 40% 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 upward for the stock, and the magnitude of these revisions has been net zero. 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.