Etsy said Wednesday it will begin testing its first-ever loyalty program in September, a move designed to boost the e-commerce site's sluggish sales and draw in occasional shoppers.
Get a deeper insight into the potential performance of Etsy (ETSY) for the quarter ended June 2024 by going beyond Wall Street's top -and-bottom-line estimates and examining the estimates for some of its key metrics.
Etsy (ETSY) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.
Etsy Inc (NASDAQ:ETSY, ETR:3E2) faces persistent discretionary retail goods spending pressures and fierce competition from low-cost online rivals which limit its upside, analysts at Wedbush believe. In a note ahead of the online marketplace's second quarter earnings report due Wednesday, July 31, after the stock market closes, the analysts wrote that they remain ‘Neutral' on the stock.
Etsy stock has underperformed the S&P 500 since I initiated my "hold" rating in May, where I expected the stock to face headwinds with GMS and profitability declining in Q1 FY24. Etsy is due to report its Q2 earnings on July 31, where revenue is expected to grow 1.7% YoY, while adjusted EPS is expected to decline 33% YoY to $0.98. However, management's commentary and guidance on GMS growth for the remainder of the year will be key, along with their projections for take rate and Adjusted EBITDA margin.
Etsy's Q1'24 earnings report disappointed due to a year-over-year drop in gross merchandise sales. Etsy, however, has a strong and profitable e-Commerce business with potential for a GMS recovery, especially in a lower-inflation world. Low earnings expectations and cheap valuation calculate to a favorable risk profile.
The Etsy marketplace, the flagship of Esty Inc., which also includes resale site Depop and musical instrument specialist Reverb, was founded in 2005 to connect buyers with makers, artists, designers and crafters selling their unique handmade, originally designed new or specially-selected vintage items.
As eCommerce titans Amazon, Temu and Shein expand their reach, Etsy is attempting to reclaim its niche by emphasizing its original mission to support artisans and crafters, but the fine print shows considerable wiggle room for less handmade products.
Etsy is overhauling the policies that govern its site to make clear to sellers and buyers what products belong on the platform. The changes come as Etsy faces pressure to compete with Amazon and emerging e-commerce players Temu and Shein.
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The stock market has been roaring higher since 2023. The S&P 500 and the Nasdaq remain elevated as the Magnificent Seven stocks propel these indices to all-time highs.
I believe buying Etsy at 10x forward free cash flow is a fair entry point. Despite Etsy's significant debt, its substantial and stable free cash flow makes it an attractive investment. If Etsy reduces its debt, it could become an even more attractive acquisition target, boosting its overall valuation.