Why Etsy stock soared 16% today
The e-commerce stock has been climbing since reporting better-than-expected revenue and earnings. But investors will need to decide if Etsy will be able to keep expanding its business in a post-pandemic world.
Shares of Etsy (ETSY) soared 16% during Friday’s trading session after the company a day earlier reported fourth-quarter revenue and earnings that topped Wall Street estimates. The company also gave weak guidance for the first half of 2022, citing the challenges of comparing the first two quarters with the year-earlier period when the digital retailer’s online sales were elevated from the pandemic. Etsy does, however, expect sales growth to pick up in the second half of the year.
Either way, investors shrugged off the weak guidance and got behind the stock. Here’s what Etsy reported and what it means for investors.
Why shares of Etsy are up
Etsy reported fourth-quarter and full-year 2021 earnings Thursday at market close with revenue and earnings that beat analyst estimates.
Revenue grew 16.2% year over year to $717 million, compared to the $685 million estimated. Earnings grew 2.78% from the same quarter last year to $1.11, topping analyst estimates of $0.76.
Etsy posted record gross merchandise sales (GMS) in the fourth quarter of $4.2 billion, up 16.5% year-over-year. The company cited an early launch to its holiday season as the reason for its record quarterly performance. Etsy launched its holiday season selling in October and saw strong sales run through the remainder of the year.
It was a record holiday season for the company. Etsy saw a record 2,000 orders per minute on Cyber Monday and a 27% increase in seller shops participating in its cyber sales. The company also acquired roughly 10 million new buyers in the fourth quarter, its highest level of new buyer acquisition in two years. Etsy said it had 96.3 million active buyers on the platform as of the fourth quarter. The number of active sellers on the platform also grew 72.3% from last year to 7,522. What investors didn’t seem to care too much about was waning sales growth. Revenue growth slowed to 16% year over year during the quarter. Etsy’s sales growth topped 141% in the first quarter of 2021, but has decelerated every quarter since.
The digital retailer said it expects lower sales growth to continue through the first half of 2022, but for it to pick up in the latter half of the year.
Thinking of buying Etsy stock?
Etsy’s solid earnings report is just what the digital retailer needed. Ahead of Thursday’s earnings, its stock had plummeted 64.46% since topping at $307.75 in November 2021. It fell to a low of $109.38 during Thursday’s trading session, a level not seen since September 2020. Etsy was a winner in ecommerce during the pandemic, but its sales growth shows the pandemic boom has faded. Moreover, the company was seeing revenue growth of above 30% prior to the pandemic. Whether Friday’s pop in share price is enough to turn the stock around remains to be seen.
Investors now need to decide if Etsy will be able to keep expanding its business in a post-pandemic world. Analysts seem to think there’s still room for growth, though, giving the stock a $236.95 price target. This represents a 59% premium over its current price. They see revenue climbing to $2.77 billion this year, a 18.88% increase from its 2021 revenue of $2.33 billion.
At the time of publication, Matt Miczulski owned shares of ETSY.
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