On Thursday, BTIG maintained a Buy rating on shares of Etsy (NASDAQ:ETSY) with a steady price target of $78.00, following the company's quarterly report which presented better-than-expected second-quarter results and Gross Merchandise Sales (GMS) guidance that met analysts' expectations.
Etsy's stock had risen 10% in the past month, and the firm believes the recent financial outcomes support the continuation of these gains.
Etsy's forecast for the third quarter of 2024 indicates a low single-digit decline in GMS, aligning with analysts' projections of a 2.2% decrease 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 the first quarter of 2024, the Etsy marketplace saw a 3.2% year-over-year drop in GMS, marking a sequential improvement, partly attributed to the timing of Easter and product enhancements.
The company's performance in key categories showed signs of improvement, with five of its six largest segments, representing 86% of GMS, experiencing better growth compared to the first quarter.
Notably, the toys and games category turned positive, and the paper & party supplies category stabilized. The gifting category also saw a 4% year-over-year increase, outpacing the low single-digit growth observed earlier in the year.
Etsy's take-rate for the quarter stood at 22.0%, surpassing guidance, driven by broader payments coverage, expansion of Offsite and Etsy Ads, and higher shipping revenue at Depop. The company's adjusted EBITDA margin was 27.7%, exceeding expectations and demonstrating effective cost management, despite a significant increase in performance marketing spend, particularly in paid social ads.
Looking forward, Etsy's adjusted EBITDA margin is anticipated to be around 27%, which could concern some investors given the market's expectation of a 29% margin. However, BTIG's analysis suggests that the overall financial results of the quarter did not significantly impact their investment thesis. The firm remains optimistic about Etsy's free cash flow yield and potential for a recovery in fiscal year 2025 if macroeconomic conditions improve.
In other recent news, Etsy exceeded Wall Street's second-quarter revenue and gross merchandise sales predictions, largely due to consistent demand for personalized gifts on its online marketplace. Notably, the gifting category saw a 4% year-over-year increase, outpacing earlier growth.
Still, Etsy's future performance has been viewed differently by various analysts. Oppenheimer downgraded Etsy's stock from Outperform to Perform, citing valuation and guidance issues. Conversely, BTIG maintained a Buy rating, emphasizing Etsy's effective cost management and potential for recovery in fiscal year 2025.
In other company news, Rachel Glaser, Etsy's Chief Financial Officer, announced her planned retirement. During her tenure, Etsy's gross merchandise sales and revenue have increased fourfold and sixfold, respectively. Wolfe Research initiated coverage on Etsy with a Peer Perform rating, anticipating long-term gains driven by international expansion and product innovation.
Turning to Crest Nicholson, the company was downgraded from Buy to Hold by Berenberg in response to a potential all-share offer from Bellway (LON:BWY). Berenberg believes there is now only limited potential for Crest Nicholson's stock to rise beyond the new price target. These are recent developments in the companies' performance and market position.
InvestingPro Insights
As Etsy (NASDAQ:ETSY) continues to navigate through its quarterly financials with a positive outlook from BTIG, real-time data and InvestingPro Tips offer additional insights into the company's performance and investment potential.
With a market capitalization of $7.62 billion, Etsy demonstrates a strong presence in the e-commerce sector. An adjusted P/E ratio of 20.01, complemented by an impressive gross profit margin of 70.41% over the last twelve months as of Q1 2024, underscores the company's profitability and efficiency in its operations.
InvestingPro Tips highlight that Etsy's management has been proactively buying back shares, signaling confidence in the company's value. Additionally, Etsy's stock has shown significant returns, with a 7.79% increase over the last week and a 14.26% rise over the last month, reflecting positive investor sentiment. These metrics, combined with the fact that Etsy is trading at a low P/E ratio relative to near-term earnings growth, suggest that the stock may be undervalued.
For investors seeking more detailed analysis, there are 12 additional InvestingPro Tips available, which can be found on the InvestingPro platform. These tips provide a deeper dive into Etsy's financial health, including its ability to cover interest payments with cash flows, its liquidity position against short-term obligations, and its moderate level of debt. With Etsy's next earnings date approaching on October 30, 2024, these insights could prove valuable for investors looking to make informed decisions.
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