Big Moment Looks Overdone: Etsy, Inc. (NASDAQ: ETSY)

On 12 Nov 2019, Etsy, Inc. stock identified change of 0.05% away from 52-week low price and recently located move of -44.37% off 52-week high price. It has market worth of $4819.3M. ETSY stock has been recorded -24.42% away from 50 day moving average and -32.95% away from 200 day moving average. Moving closer, we can see that shares have been trading -21.12% off 20-day moving average.

Etsy, Inc. (ETSY) recently reported financial results for its third quarter ended September 30, 2019.

Third Quarter 2019 Highlights

The following operational highlights include results related to the Etsy.com marketplace and do not include Reverb results:

  • In July, we began providing Etsy.com sellers with tools and support that enable them to offer free shipping on orders of $35 or more to U.S. buyers. In September, we released a campaign to notify our buyers of the new program, highlighting shops that are offering free shipping on their orders. As of the end of the third quarter, 62% of items on the Etsy marketplace provided free shipping to U.S. buyers and 74% of U.S. listing views were eligible to ship for free.
  • We migrated Etsy sellers who before used Promoted Listings and/or Google Shopping to Etsy Ads in the third quarter. We continue to optimize between channels targeting a return on their ad spend and to-date, we have seen negligible budget churn from sellers.
  • As a result of migrating our search efforts to Google Cloud, we made a foundational upgrade to our ranking algorithms, which will enable Etsy to provide more relevant search results to buyers on Etsy.com. In addition, we continued to improve our mobile app, began highlighting items that are similar to items buyers have made a favorite in the past, released variation photos, and integrated several shipping solutions, all geared to helping improve the overall shopping experience. We also released a regional sales feature, which allows for sellers to set a country-specific sale, with a focus on their domestic listings.
  • During the third quarter, we released a new national television campaign for Etsy, which features holiday gifting experiences and will be tested, with a localized version, in the United Kingdom as well during the holiday season. Leveraging our learnings from previous campaigns, we will optimize for reach, frequency and return as we head into the busiest shopping period of the year.
  • In the third quarter, active buyers and active sellers increased 19.1% and 19.3% year-over-year, respectively. We purchased about 4.2M new buyers in the third quarter.
  • For the Etsy marketplace, GMS from paid channels was about 14% of overall GMS in the third quarter, contracting about 250 basis points contrast to the third quarter of 2018, and about 40 basis points contrast to last quarter as we resumed our television campaign which drives more organic traffic.
  • As we continue to shift our marketing spend up-funnel to drive frequency, organic GMS as a percentage of overall GMS for the Etsy marketplace has expanded from 80% in the fourth quarter of 2018 to 86% in the third quarter.
  • Etsy’s GMS per active buyer on a trailing 12-month basis grew for the sixth consecutive quarter and on a 2-year basis increased nearly 4%, evidence of our continued progress improving frequency.
  • International GMS grew about 31% year over year and was 38% of total GMS. U.S. domestic GMS growth accelerated for the second consecutive quarter to nearly 17%. U.S. buyer GMS, a metric that includes a U.S. buyer who made a purchase from an international seller, grew 21% in the third quarter, reflecting the positive impact our U.S. marketing campaigns have on U.S. buyer demand.
  • On August 15, 2019, we completed the acquisition of Reverb, a privately held marketplace for new, used and vintage music gear for about $271.4M in cash, net of cash purchased. From the acquisition date through the end of the third quarter, Reverb generated $76.9M in GMS. Percent international GMS was about 17%. These operational metrics drove $6.0M in revenue resulting in a take rate of 7.8%. At the end of the third quarter, Reverb active buyers and active sellers totaled 594 thousand and 155 thousand, respectively.

Third Quarter 2019 Consolidated Financial Results

  • Total revenue was $197.9M for the third quarter of 2019, which included $6.0M related to the results of Reverb, up 31.6% year-over-year, driven by growth in both Marketplace and Services revenue.
  • Gross profit for the third quarter of 2019 was $129.0M, up 24.7% year-over-year, and gross margin was 65.2%, down 360 basis points contrast with 68.8% in the third quarter of 2018. The contraction in gross margin was primarily driven by fees related to Etsy Payments, amortization related to our recent acquisition of Reverb, and our consolidated ad platform, Etsy Ads, which we believe is a tailwind to revenue growth and GMS.
  • Total operating expenses were $114.8M in the third quarter of 2019, up 35.5% year-over-year, and represented 58% of revenue. The increase in operating expenses were driven primarily by marketing expense, specifically the investment in our TV campaign. Marketing expense as a percentage of revenue was 25.3% contrast to 26.3% in the third quarter of 2018, a contraction year-over-year and sequentially as we gained leverage driving efficiencies in our marketing spend.
  • Net income for the third quarter of 2019 was $14.8M, with diluted earnings per share of $0.12.
  • Non-GAAP Adjusted EBITDA for the third quarter of 2019 was $42.1M and grew 23.6% year-over-year. Non-GAAP Adjusted EBITDA margin (i.e., Adjusted EBITDA divided by revenue) was 21.3% in the third quarter of 2019, down 130 basis points year-over-year. Adjusted EBITDA performance was driven primarily by year-over-year revenue growth and cost efficiencies in our operating expenses.
  • Cash, cash equivalents, short- and long-term investments were $856.7M as of September 30, 2019. Under the stock repurchase program accepted in November 2018, Etsy repurchased an aggregate of about $2.8M, or 50,721 shares of its ordinary stock in the third quarter of 2019.
  • During the third quarter, Etsy completed a convertible debt offering issuing $650.0M aggregate principal amount of 0.125% Convertible Senior Notes due 2026 (the “2019 Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The initial conversion price of the 2019 Notes represented a premium of about 47.5% over the price of Etsy’s ordinary stock as of September 18, 2019 (the date the offering closed). In addition, Etsy initiated a concurrent share repurchase of about $124.5M, or nearly 2.1M shares, and entered into capped call transactions at 150% premium over the price of Etsy’s stock as of September 18, 2019. The capped call transactions are generally predictable to reduce potential dilution. The net proceeds of these transactions were about $438.7M after deducting the initial purchaser discount, offering expenses, share repurchase and capped call transaction costs.

The Services sector company, Etsy, Inc. noticed change of -0.07% to $40.8 along volume of 5012524 shares in recent session compared to an average volume of 3740.05K. The stock observed return of -5.62% in 5 days trading activity. The stock was at -30.98% over one month performance. ETSY’s shares are at -22.79% for the quarter and driving a -21.55% return over the course of the past year and is now at -14.23% since this point in 2018.   The average volatility for the week at 3.31% and for month was at 4.05%. There are 118.12M shares outstanding and 117.11M shares are floated in market. Right now the stock beta is 0.95.

 

Leave a Reply

Your email address will not be published. Required fields are marked *