Etsy Crushes 2Q Revenue Expectations; Roth Raises Stock To Buy


Shares of Etsy rose 4.4% on Wednesday and touched a new 52-week high of $136.29 after surpassing 2Q estimates on triple-digit revenue growth rate. Its earnings of $0.75 per share and revenues of $429 million came well ahead of the analysts’ estimates of $0.39 for earnings and $330 million for revenues. The company’s 2Q sales were driven by a surge in online shopping amid the pandemic.

Etsy (ETSY) recorded 2Q GMS (gross merchandise sales) growth of 146% and revenue growth of 137% year-over-year. Its consolidated active buyers and active sellers grew 41% and 34.6%, respectively, on a year-over-year basis, during the reported quarter. The company’s adjusted EBITDA jumped over 279% to $150.6 million in 2Q.

For 3Q, the company expects GMS year-over-year growth of 80% to 110%, while it forecasts revenue growth of 85% to 115%. In addition, the online marketplace expects 3Q adjusted EBITDA margin of 28% to 32%. Etsy CEO Josh Silverman stated that “While we have limited visibility for the fourth quarter, particularly related to macro trends and consumer spending around Holiday, our third quarter guidance clearly indicates very strong overall performance for 2020.”

Roth Capital analyst Darren Aftahi upgraded Etsy to Buy from Hold and lifted the price target to $160 (18.1% upside potential) from $90. Aftahi is optimistic about the company’s 3Q expectations. He believes that “COVID-19 trends have continued into 3Q (July GMS +152% y/y) as the halo impact is more persistent than anticipated.” He added that “With non-mask GMS up ~93% y/y and new buyer retention trending positively, we believe these trends are too strong to discount, with incremental catalysts for growth via investment while maintaining healthy margins.”

Currently, the Street has a bullish outlook on the stock. The Strong Buy analyst consensus is based on 14 Buys, 1 Hold, and 1 Sell. Given the stock’s 206% rally year-to-date, the average analyst price target of $113.25 implies downside potential of about 16%. (See ETSY stock analysis on TipRanks).

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