Etsy Inc (ETSY) stock is not what you’d metaphorically term the belle of the ball of late. Going into Tuesday afternoon earnings, shares of the homemade goods retailer were down 61% year-over-year, and 69% from its IPO first-day closing price in April 2015.
Sentiment was decidedly negative going into Q1 results after the bell on Tuesday, and traders sent the stock down 1.3% in the day leading up to the report, underlining just how little confidence Wall Street has in ETSY stock.
Well, traders certainly gained some confidence in the company after Q1 results, which showed Etsy beating on revenue and earnings expectations while swinging to a surprise profit.
There’s little doubt that this is an objectively good report for ETSY stock, especially considering its previously weak earnings track record.
Investors at least seem to agree at the moment: Shares were up more than 13% in after-hours trading at the time this article was published.
ETSY Stock: The Bounce-Back Investors Need?
As I noted in a previous article, ETSY stock needed this. To restore confidence in the company’s future, Etsy needed to show resilience and beat estimates.
Which is precisely what it did.
Etsy reported revenue of $81.85 million, up roughly 40% year-over-year, crushing analyst estimates that called for a 28% jump in revenue to $75.15 million. And instead of reporting a loss of 2 cents per share, ETSY stock earned a penny a share in the first quarter, up from a loss of 84 cents per share a year ago.
Importantly, Etsy also saw a boost in mobile activity, something that investors love to see in today’s increasingly mobile world. While not quite as impressive as, say, the mobile growth Facebook Inc (FB) saw in the first quarter, the fact that 63% of visits were from mobile was a sound increase from the 59% it logged a year ago.
Plus, it’s not a knock against Etsy that it can’t impress like Facebook can.
What is impressive, though, is that the persistent presence of Amazon.com, Inc.’s (AMZN) Amazon Handmade hasn’t hampered Etsy’s revenue growth more significantly. Yes, Etsy’s revenue growth has been affected — it fell from 68% in 2013 to 40% in 2015 — but to some degree, that’s simply a consequence of its larger size.
The revenue growth was aided by strong gains in “seller services” revenue, which jumped 59.6% year-over-year to $43.5 million. Analysts were expecting that category to clock in at $39 million, so $4.5 million of the $6.7 million revenue beat — or 67% of it — came from that category alone.
Given the exemplary results, the after-hours gains in ETSY stock should hold on Wednesday. The more interesting story will be to see how the stock performs over the next week or two, and if it can add to its one-day gains.
While I’m not necessarily a fan of investing in the shares for the long-term, I wouldn’t be surprised if ETSY stock went on a nice little post-earnings run here.
As of this writing, John Divine was long AMZN stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
