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Investors sent Etsy ( ETSY ) surging as the online crafts marketplace beat Wall Street’s expectations for its Q4 sales — an important quarter because of holiday sales. The Q4 sales haul reported Wednesday morning was up 35% to $87.9 million and Etsy reported a loss of 4 cents per share ex items. Analysts polled by Thomson Reuters had expected a 1 cent per share loss and sales of $86.5 million. Etsy is an online marketplace for uniquely crafted and curated goods from individual sellers. As such, Etsy has a narrower focus than much larger competitor eBay ( EBAY ), though like eBay it maintains no physical warehouses or distribution mechanisms. E-commerce giant Amazon ( AMZN ) has edged in on the crafts business idea, launching its Handmade at Amazon program last year. Etsy stock was up 6% to around 8 in afternoon trading in the stock market today . Etsy has a low IBD Composite Rating of 23, where 99 is the highest. Etsy’s chart has been a slippery slope. Debuting with an 88% pop from its April 16 IPO — it was priced at 16 and surged to as much as 35.74 in its first trading day– the stock has steadily declined. Though there were occasional pops, they were short-lived; even with the frenzied buying in the wake of Q4 earnings, Etsy stock still sits nearly 80% off its one-time high. Analysts are cautious about the stock but believe some upside is coming. “We believe growth will converge with overall e-commerce growth over the next couple of years as seller growth diminishes and marketing spend delivers declining yields,” Wedbush analyst Gil Luria wrote in a research note Thursday. Company executives offered 2016-18 compound annual growth guidance of 20% to 25% for revenue and 13% to 17% for gross merchandise sales. Etsy said 2016 should come in at the high end of the range for revenue and around the midpoint for gross merchandise sales. Thursday afternoon analysts polled by Thomson Reuters were modeling for about 25% revenue growth for 2016. Gross merchandise sales is the total dollar value of the goods sold over the Etsy platform. The analyst also noted that Etsy’s marketing spend grew 56% and its digital spend by 86%. “We believe management is content with the return on investment on this spend, this gap (between marketing and gross merchandise sales) is unsustainable and growth rates will be tested as marketing spend diminishes as a percent of revenue in 2016 (per guidance),” Luria wrote. Luria maintained his neutral rating and 12-month price target of 9. Etsy’s gross merchandise sales for 2015 came in at $2.39 billion vs. eBay’s gross merchandise volume of $82 billion. After eBay’s Q4 results, investors went into sell-off mode, sending the stock plunging. Shares were up 1.5% in afternoon trading Thursday. Wells Fargo analyst Matt Nemer wrote in a research note that investors may have overreacted to the earnings. Luria said the guidance was lower than what he expected. “In our view, eBay shares are one of the few inexpensive ways to play defense in a slowing consumer environment,” he wrote, adding that executives did not alter the firm’s outlook for its core business. Nemer acknowledged that eBay is in a “transition period,” but he says that in the long run the firm is a “highly stable, flexible, data-driven business that should provide some downside protection in the current environment.” Scalper1 News
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