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Saturday, April 1, 2023

Why Etsy Stock Surged Today

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What happened

Shares of Etsy ( ETSY 16.21% ) popped on Friday after the online marketplace reported solid growth in sales and profits. As of 2:25 p.m. ET today, Etsy’s stock price was up more than 15%.

So what 

Gross merchandise sales (GMS) — essentially, the total dollar value of transactions on its platform — grew 16.5% year over year to $4.2 billion in the fourth quarter. Management credited the gains to a strong holiday selling season, including solid sales performances on Black Friday and Cyber Monday.

In a press release, CEO Josh Silverman said, “Reflecting on 2021, it is fair to say that Etsy has retained much of the positive impact we’ve seen from the dramatic adoption of e-commerce following the start of the COVID-19 pandemic.” 

Image source: Getty Images.

The number of active sellers on Etsy’s marketplaces soared 72.3% to 7.5 million. Meanwhile, the number of active buyers increased 17.6% to 96.3 million.

Better still, customers are spending more on Etsy’s marketplaces. GMS per active buyer on a trailing-12-month basis climbed 16% to $136. And habitual buyers, who make six or more purchases and spend over $200, jumped 26%.

“During the holiday season, our sellers — most businesses of one and insulated from widespread supply shortages or complex fulfillment processes — brought the benefits of shopping small to scale,” Silverman said. “Shoppers continue to love their experiences with Etsy and are coming back for more.”

In all, Etsy’s revenue rose 16.2% to $717.1 million. Its net income, in turn, increased 8.8% to $161.6 million, or $1.11 per share. Both figures were ahead of Wall Street’s estimates, which had called for revenue and earnings per share of $685 million and $0.79, respectively. 

Now what

For the first quarter of 2022, management sees GMS of $3.2 billion to $3.4 billion and revenue of $565 million to $590 million. That would represent year-over-year growth of 5% at the midpoint of those ranges. 

And chief financial officer Rachel Glaser said investors can expect Etsy’s growth to reaccelerate in the second half of the year.

“Even without the significant tailwinds of stimulus checks and lockdowns, our first quarter 2022 guidance reflects our expectation that we will keep all of the gains made in 2021 — indicating our belief in the durability of the last two years’ growth,” Glaser said.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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