‘The Unmasking’: Etsy Stock Plunges 11% on Big Outlook Miss, Analysts Concerned
2022.05.05 14:46
‘The Unmasking’: Etsy (ETSY) Stock Plunges 11% on Big Outlook Miss, Analysts Concerned
Shares of Etsy (NASDAQ:ETSY) are down more than 11% in pre-open Thursday after the company reported results and offered guidance for the ongoing quarter.
Etsy reported a Q1 EPS of 60c, down from $1 per share in the year-ago quarter and in line with the consensus estimates. Revenue came in at $579.3 million, up 5.2% YoY and above the consensus projection of $575.6 million.
“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,” said Etsy CEO Josh Silverman.
The number of active sellers totaled 7.65 million in the period, up 63% YoY and topping the analyst estimates of 7.5 million. Etsy reported 95.10 million active buyers, up 4.9% YoY and missing the analyst expectations of 97.5 million. The company generated $3.3 billion in gross merchandise sales, up 5% YoY and in line with the consensus estimates.
On the call with analysts, Etsy said January was strong, February was flat, March was worse, and April has been even worse.
Looking ahead to the second quarter, Etsy expects revenue in the range of $540 million to $590 million, missing the expected $628.8 million. The company anticipates Q2 gross merchandise sales in the range of $2.9 billion to $3.2 billion, while analysts were looking for $3.44 billion. The adjusted EBITDA margin is expected to be roughly 25%, compared to the analyst expectations of 26.5%.
“In a world of so many more choices, our guidance implies somewhere between a decline of low to high single digits for Etsy marketplace GMS year-over-year— retaining over 90% of the gains we have made over the past 2 years. Despite the near-term uncertainty, we have ample reason to remain very optimistic for the long-term,” Silverman added.
UBS analyst Kunal Madhukar says that results were worse than feared and have likely only increased uncertainty.
“While macro remains ‘challenging to predict,’ Etsy noted that comps are easier in 2H, which could result in y/y acceleration versus 1H levels. However, given there is a ‘lot we don’t know and can’t control,’ it didn’t give full-year guidance. At the same time, it continues to invest and not only guided 2Q margins below but also said lower margins likely to persist through the year. Given the uncertainty, slower growth, and lower margins, we think it is tough to see how the stock outperforms peers in the near-term, although volatility could be high,” the analyst said.
Morgan Stanley analyst Lauren Schenk lowered the price target to $113.00 per share from the prior $154.00.
“Worse than feared 2Q core GMS growth and 2H margins plus a more uncertain medium-term growth algorithm likely limit the multiple investors are willing to pay in the near-term. Compelling at the right price, but still not inexpensive even on lowered numbers,” Schenk told clients in a note.
“ETSY is one of the higher quality businesses that we cover, with limited competitive threats, strong margins, and real cash flow… but the market lives in a world of sequentials and sequential top-line trends likely continue to decelerate from here.”
By Senad Karaahmetovic
