On Thursday, BTIG maintained a Buy rating on Etsy (NASDAQ:) shares with a $78.00 price target, following the company’s quarterly report that delivered better-than-expected Q2 results and gross merchandise sales (GMS) guidance that met analysts’ expectations.
Etsy shares have risen 10% in the past month, and the company believes its recent financial results support a continuation of those gains.
Etsy’s Q3 2024 outlook is for a low single-digit decline in retail sales, in line with analysts’ expectations of a 2.2% decline to $2.97 billion. This guidance reflects a more challenging year-over-year comparison for both the consolidated company and the Etsy marketplace specifically.
In Q1 2024, Etsy saw a 3.2% year-over-year decline in GMS sales, indicating a sequential improvement, due in part to Easter timing and product improvements.
The company’s performance in key categories showed signs of improvement, with five of the top six segments, representing 86% of total global sales, experiencing better growth compared to the first quarter.
It is worth noting that the toys and games category performed positively, while the paper and party supplies category stabilized. The gift category also witnessed a 4% increase year-on-year, overcoming the low growth recorded earlier in the year.
Etsy’s acceptance rate for the quarter was 22.0%, beating guidance, driven by broader payments coverage, Offsite and Etsy advertising expansion, and higher shipping revenue at Depop. The company’s adjusted EBITDA margin was 27.7%, beating expectations and demonstrating effective cost management, despite a significant increase in performance-based marketing spend, particularly in paid social.
Looking ahead, Etsy’s adjusted EBITDA margin is expected to be around 27%, which may be a concern for some investors given the market’s expectations of a margin of 29%. However, BTIG’s analysis notes that the quarter’s overall financial results did not significantly impact their investment thesis. The firm remains optimistic about Etsy’s free cash flow return and the potential for a recovery in fiscal 2025 if macroeconomic conditions improve.
In other recent news, Etsy beat Wall Street expectations in the second quarter in terms of revenue and total merchandise sales, largely due to continued demand for personalized gifts on its online marketplace. Notably, the gift category saw a 4% year-over-year increase, outpacing previous growth.
However, several analysts view Etsy’s future performance differently. Oppenheimer downgraded Etsy’s stock from “outperform” to “good perform,” citing issues with valuation and direction. Conversely, BTIG maintained a “buy” rating, emphasizing Etsy’s effective cost management and potential for recovery in fiscal 2025.
In other company news, Etsy CFO Rachel Glaser announced her intention to retire. During her tenure, the company’s total merchandise sales and revenue grew four-fold and six-fold, respectively. Wolfe Research initiated coverage of Etsy with a Peer Perform rating, anticipating long-term gains driven by international expansion and product innovation.
Moving on to Crest Nicholson, the company was downgraded from buy to hold by Berenberg in response to a potential all-share offer from door bell (LON:). Berenberg believes there is now only limited potential for Crest Nicholson shares to rise beyond the new target price. These are the latest developments in the companies’ performance and market position.
InvestingPro Insights
As Etsy (NASDAQ:ETSY) continues to navigate its quarterly financials with a positive outlook from BTIG, real-time data and InvestingPro tips provide additional insights into the company’s performance and investment potential.
With a market cap of $7.62 billion, Etsy is proving its strong presence in the e-commerce sector. The adjusted price-to-earnings ratio of 20.01, along with an impressive gross profit margin of 70.41% over the past twelve months through Q1 2024, attest to the company’s profitability and efficiency in its operations.
InvestingPro’s advice highlights that Etsy’s management has been proactively buying shares, indicating confidence in the company’s value. Additionally, Etsy’s stock has posted strong returns, up 7.79% over the past week and up 14.26% over the past month, reflecting positive investor sentiment. These metrics, combined with the fact that Etsy is trading at a low price-to-earnings ratio relative to its near-term earnings growth, suggest that the stock may be undervalued.
For investors looking for a more detailed analysis, there are 12 additional InvestingPro tips available, which can be found on the InvestingPro platform. These tips provide a deeper look into Etsy’s financial health, including its ability to cover interest payments with cash flow, its liquidity position versus short-term liabilities, and its moderate level of debt. With Etsy’s next earnings date approaching on October 30, 2024, these insights may be useful for investors looking to make informed decisions.
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