Why I Still Like ETSY Long Term

This first-quarter earnings season has been a very exciting one for investors. According to FactSet, more than 60% of S&P 500 companies have released results from the latest quarter, and 86% of these companies have exceeded analysts’ earnings estimates.

etsy logo on a grey wall

Source: quietbits / Shutterstock.com

What’s even more impressive is that the first-quarter earnings growth rate is now running at 45.8%, up from the estimated growth rate of 23.8% at the end of March. That’s the best earnings growth rate in 11 years, and the second quarter is now anticipated to be even stronger!

Now, while many companies are being rewarded for their strong earnings results, there are also those that are hit with profit-taking despite topping analysts’ expectations.

Take Etsy, Inc. (NASDAQ:ETSY), for example.

Founded in 2005 to create a community where people can uncover unique items, Etsy is an online platform that connects millions of shoppers with sellers of handmade, one-of-a-kind goods and antique items.

The company is based in Brooklyn, New York, but it has buyers and sellers in practically every country around the world. The majority of its buyers and sellers hail from the U.S., Canada, the U.K., Australia, France and Germany. Buyers can search from more than 60 million items in several retail categories. And sellers have access to a handful of services, including on-site advertising, payment processing, shipping labels and custom websites.

Shares of Etsy, Inc.  fell more than 15% following its first-quarter earnings report on Wednesday. But what’s interesting here is that Etsy actually beat sales and earnings expectations for the first quarter. So, why exactly did the stock plummet? Well, the short answer is that guidance for the second quarter wasn’t looking as hot due to the year-over-year decline in online shopping. Company management commented, “We currently expect Q2 2021 GMS to decelerate along with the rest of e-commerce as we lap the tremendous 2020 growth rates.”

But if you take a step back, the overall first-quarter earnings report was still quite strong. Etsy achieved earnings of $143.8 million, or $1.00 per share, and sales of $550.6 million. That represented 1,048.1% year-over-year earnings growth and 141.5% year-over-year sales growth. The consensus estimate called for earnings of $0.88 per share on $529.77 million in sales, so Etsy posted a 13.6% earnings surprise and 3.9% sales surprise.

Looking forward, second-quarter revenue is expected to grow to $493 million to $536 million, 15% to 25% year-over-year revenue growth. While the company’s growth is tapping the brakes slightly, double-digit revenue growth is still nothing to sneeze at. The reality is Wall Street knee-jerk reacted to the earnings report, but it remains in the fundamentally superior camp.

A quick look at Etsy’s Report Card will also show you that Etsy is in great shape.

As you can see, the stock earnings an A-rating for its Quantitative Grade and Total Grade. So, it remains a “Strong Buy” right now.

The bottom line: Even though ETSY took a hit this week, it remains a good long-term buy. ETSY bounced more than 4% today, and as I like to say, good stocks bounce like “fresh tennis balls.” Clearly, that’s just the case with ETSY, so I look for the stock to continue to rebound in the coming weeks.

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The Editor (Louis Navellier) hereby discloses that as of the date of this email, the Editor (Louis Navellier), directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

Etsy, Inc. (ETSY)


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