Etsy Stock Climbs 7% as Q4 Sales Hit $88M

The better-than-expected revenue cheered some investors but Wall Street is skeptical that the company can sustain growth in 2016.
Matthew HellerFebruary 24, 2016

Etsy shares rose nearly 7% Wednesday after the online marketplace posted better-than-expected fourth-quarter revenue but analysts remained skeptical about its long-term prospects.

In a strong finish to a difficult year, Etsy reported $87.9 million in revenue and a loss of 4 cents per share. At the end of the fourth quarter, it had 1.6 million active sellers, up from 1.5 million active sellers in the previous quarter, while active buyers rose to 24 million from 22.6 million.

Analysts were expecting a loss of 1 cent per share on revenue of $86.5 million. After climbing as much as 13% in extended trading Tuesday following the earnings report, Etsy’s stock closed Wednesday at $7.90, up 6.9%.

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“The fourth quarter was an important one for Etsy — it had to show investors that it could post a strong holiday quarter and bring in new people who would buy gifts and other products on Etsy,” TechCrunch said. “It looks like investors were pleased by its ability to beat on revenue and bring in some new buyers and sellers.”

Etsy’s gross merchandise sales (GMS) were up 21.3% to $741.5 million from $611.5 million in the fourth quarter last year. But marketing costs rose 54%.

“This gap [between marketing and GMS] is unsustainable and growth rates will be tested as marketing spend diminishes as a percent of revenue in 2016,” Gil Luria, an analyst at Wedbush Securities, told the Wall Street Journal.

For 2016, Etsy expects GMS growth to be around 15% and revenue growth to come in close to 25%. Both of those metrics represent a decline from the 24% GMS growth in 2015 and 40% revenue growth last year.

The company’s shares are still well below the initial public offering price of $16 last April and are down 4.5% for the year so far. Etsy has also lost $54 million over the past year.

“Etsy is also continuing to navigate a shift to more mobile sales, with mobile visits accounting for 61% of the company’s overall visits, and 44% of gross merchandise sales coming from mobile devices,” TechCrunch said.