Etsy’s Shares Fall in Spite of Strong Earnings Report

The company reported gains in revenue and earnings but lowered its profit outlook.

2019 has been a year of solid growth for the e-commerce company Etsy. The company serves a niche market of buyers and sellers and has seen its shares rise more than 47% in 2019. 

On Thursday, the company released its second-quarter earnings report after market close. The earnings report showed gains across the board for Etsy but the company did lower its profit outlook, which disappointed investors. As a result, the company’s shares fell more than 8% on Friday morning.

Details on Etsy’s earnings report

In many ways, it’s a surprise that the company’s shares fell at all since the earnings report is so strong and showed huge growth from just a year earlier. The company’s revenue increased by 37% to reach $181 million. 

And earnings were 14 cents per share, which is more than three times higher than what they were a year earlier. And the company saw growth in its active buyers and active sellers. 

Etsy also increased its guidance for full-year revenue and gross merchandise sales. But the company lowered its forecast for EBITDA from $190 million to $185 million. It also lowered its margins from 25% to 23%. 

However, the outlook from company executives seemed positive. A press release from CEO Josh Silverman stated that the company’s strong growth in revenue and GMS “reflects solid execution across our portfolio of product and marketing investments and the strength of our core marketplace.” 

Final thoughts

In spite of the drop in shares, analysts didn’t seem to be shaken by the earnings report. An RBC Capital Markets analyst held a sector perform rating on the company while raising its price target. 

A Stifel analyst also raised the company’s price target, saying that Etsy is working on a number of initiatives that will continue to drive growth. These initiatives include things like improving shipping and making it easier for sellers to grow their businesses. 

Etsy is also improving its mobile app and is taking steps to acquire the online musical marketplace Reverb for $275 million. All in all, the earnings report may have temporarily disappointed investors but it is unlikely to impact Etsy long-term.