Etsy beats earnings expectations, sees slowing growth for Q2
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Etsy (ETSY) reported first-quarter financial results after the market close Wednesday. Despite beating on both top and bottom lines, the stock was down as much as 7% in after hours trading. For the second quarter, Etsy projects slowing growth for revenue and gross merchandise sales.
Executives project revenue to grow between 15% and 25%, and gross merchandise sales to grow between 5% and 15% year-over-year, compared to the triple-digit growth between 2019 and 2020.
The company said it will not be issuing guidance for the full year.
Here's how Etsy performed this quarter:
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Earnings per share: $1.00 vs. consensus expectations of $0.97 (compared to $0.10 for Q1 2020)
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Revenue: $550.6 million vs. consensus expectations of $530.4 million (compared to $228 million for Q1 2020)
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Gross merchandise sales: $3.14 billion vs. consensus expectations of $3.04 billion (compared to $1.4 billion for Q1 2020)
The online marketplace for unique items from independent sellers has experienced explosive growth during the coronavirus pandemic. E-commerce continues to take up a greater share of retail, with online purchases making up 19% of total retail sales, up from 16% in 2019, according to a new United Nations report.
Etsy, which initially benefited from demand for face masks, has seen growth across multiple categories, including organization tools, gifts for outdoor and recreation, and pet supplies.
Shares of the platform are up 144% over the last 12 months, compared to the Nasdaq's gain of 45%. However, the stock is down 16% over the last three months, perhaps reflecting that any pandemic-fueled gains may already be fully realized.
While the company did not provide full-year guidance, CFO Rachel Glaser alluded to growth projections for the remainder of the year during the Q4 2020 earnings call after reporting major beats on both revenue and profit.
Citing third-party data, Glaser said for the sector, "Q1 2021 growth will be approximately in line with Q4 2020 and that the industry will start to more rapidly decelerate starting in Q2 with the majority of incremental growth for the year realized in the first quarter. It remains our ambition to continue to outgrow e-commerce, propelled by the underlying changes we've seen in the marketplace and the heightened awareness of our differentiated brand."
Etsy, the fourth largest e-commerce site by monthly visits, has 12 buy, two holds, and one sell rating on Wall Street. Last week, KeyBanc downgraded the company from overweight, or sell, to sector weight, the equivalent of a hold rating, noting that while Etsy "remains one of the best long-term growth opportunities," it's already at a "fair valuation and lower likelihood of near-term earnings beats."