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Etsy’s Muted Q2 Guidance Spooks Investors

E-commerce company Etsy, Inc. (NASDAQ: ETSY) has reported stronger-than-expected results for the first quarter ended March 31, 2022.

Despite the solid results, shares of the company declined 10.8% to close at $97.49 in Wednesday’s extended trading session. The fall in the share price can be attributed to the company’s muted guidance for the second quarter.

Revenue & Earnings

Revenues for the quarter stood at $579.3 million, up 5.2% year-over-year. Further, the figure surpassed the consensus estimate of $575.44 million. The topline growth was marked by the 3.4% and 10.6% year-over-year growth witnessed in marketplace revenue and services revenue, respectively.

The company’s earnings per share (EPS) for the quarter came in at $0.60, down 40% year-over-year. However, the figure surpassed the consensus estimate of $0.59 by a whisker.

Other Operating Metrics

Etsy’s active sellers grew 62.8% to 7,654 and its active buyers increased 62.8% to 95,102.

However, the company’s adjusted EBITDA declined 13.5% from the previous year to $159.2 million. Similarly, the adjusted EBITDA margin declined to 27% from 33% a year ago.

Q2 Outlook

For the second quarter of 2022, the company forecasts revenues in the range of $540 million to $590 million against the consensus estimate of $627.8 million.

The adjusted EBITDA margin for the second quarter is anticipated to be about 25%.

Management Commentary

The CEO of Etsy, Josh Silverman, said, “Despite continued uncertainty and macroeconomic headwinds, Etsy continues to rise to the occasion to deliver solid results that show us maintaining most of the gains reported during the extremely strong year-ago period. We kicked off 2022 with product and marketing investments aligned with our ‘Right to Win,’ with a keen focus on delivering value to our sellers by attracting new buyers to Etsy and increasing buyer purchase frequency.

“In addition, we are particularly proud of our efforts to support our community in Ukraine through a combination of efforts in keeping with our core mission and fundamental values.”

Stock Rating

Consensus among analysts is a Strong Buy based on nine Buys and two Holds. ETSY’s average price target of $185 implies upside potential of 69.2% from current levels. Shares have declined 40.8% over the past year.

Website Traffic

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into Etsy’s performance this quarter.

According to the tool, the Etsy website recorded a 5.61% monthly decline in global visits in March, compared to February. However, the footfall on the company’s website has increased 50.25% so far this year.

Etsy’s strong website traffic activity, so far this year, is visible in the company’s solid performance.

Conclusion

Etsy’s strong first-quarter results were driven by growth in the topline and improved seller and buyer metrics. However, muted guidance for the second quarter can be a headwind for the company in the future.

Learn more about the Website Traffic tool in this video by Youtube sensation Tom Nash.

Read full Disclaimer & Disclosure

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