What Happened?
Shares of online marketplace Etsy (NASDAQ:ETSY) jumped 5.5% in the morning session after the company reported second-quarter financial results that showed revenue growth despite a drop in gross merchandise sales.
The e-commerce platform reported second-quarter revenue of $672.7 million, a 3.8% increase year-over-year that beat analyst expectations. However, this growth occurred despite a 4.8% decline in Gross Merchandise Sales (GMS), which is the total value of goods sold on its marketplaces. The revenue increase was attributed to a higher take rate, the percentage of each sale Etsy keeps, and growth in on-site advertising. While revenue impressed, net income and earnings per share fell short of Wall Street's consensus estimates, a miss that the company connected to a non-cash foreign exchange loss. Despite the mixed results, investor sentiment was positive, buoyed by the revenue beat and subsequent analyst upgrades. For instance, Canaccord Genuity and Stifel Nicolaus both raised their price targets on the stock following the report.
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What Is The Market Telling Us
Etsy’s shares are quite volatile and have had 19 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 6 days ago when the stock gained 3.1% on the news that the stock hit a new 52-week high of $66.21, fueled by strong recent performance and positive analyst updates.
The e-commerce platform's stock had already seen a significant climb, rising 48% over the past couple of months and gaining over 8% in the past week alone. This momentum was supported by strong underlying financials, including robust gross profit margins of 72.3%. Investor confidence was further bolstered by Wall Street analysts. Raymond James maintained its 'Outperform' rating and increased its price target to $70, as it cited expectations for a modest improvement in demand. Similarly, UBS Group lifted its target price on the company from $45.00 to $62.00. The positive sentiment was also reflected in institutional activity, as firms like SYM FINANCIAL Corp purchased new stakes in the retailer.
Etsy is up 21.2% since the beginning of the year, and at $64.39 per share, it is trading close to its 52-week high of $65.14 from July 2024. Investors who bought $1,000 worth of Etsy’s shares 5 years ago would now be looking at an investment worth $572.65.
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