Etsy ETSY shares jumped 7.19% to close at $51.44 on Thursday following the announcement of third-quarter 2024 results.
Revenue Growth Driven by Marketplace Sales
Etsy’s revenues rose 4.1% year over year to $662.4 million, surpassing the Zacks Consensus Estimate by 1.31%. This growth was primarily fueled by an increase in Marketplace revenues.
However, third-quarter 2024 earnings of 45 cents per share fell short of the Zacks Consensus Estimate by 16.67%, marking a year-over-year decline of 29.7%.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Etsy’s Stock Repurchase Plan
Etsy announced a stock repurchase program worth $1 billion, having repurchased approximately $156 million, or 2.7 million shares, of its common stock in the third quarter of 2024.
Despite the positive stock response, ETSY shares have underperformed the Zacks Retail and Wholesale sector year-to-date, with a loss of 40.8% compared to the broader sector’s gain of 19.4%.
Etsy, Inc. Price, Consensus and EPS Surprise
Etsy, Inc. price-consensus-eps-surprise-chart | Etsy, Inc. Quote
Marketplace Revenues Show Positive Trends
Marketplace revenues totaled $476.1 million (71.9% of total revenues), reflecting a 3.3% increase from last year’s figures. Payment fee revenues, a new seller setup fee, and offsite ad fees were key contributors to this growth.
Etsy attracted 5.3 million new buyers, bringing the total number of active buyers to 91.2 million, which is a slight year-over-year increase of 0.4%. Meanwhile, services revenues climbed 6.2% year over year to reach $186.3 million (28.1% of total revenues).
Active User Base Sees Increases
Etsy’s active buyer base grew 0.7% from the previous year to 96.7 million, though it slightly missed the consensus estimate of 97.2 million. The active seller base decreased by 3.2% year-over-year to 8.5 million, falling short of the consensus estimate of 9.7 million.
Etsy has also seen a positive trend in buyer reactivation, with reactivated buyers totaling 6.4 million, a 5.6% rise year over year.
However, gross merchandise sales (GMS) were reported at $2.92 billion, down 4.1% both on a reported and currency-neutral basis compared to the previous year. This figure did not meet the Zacks Consensus Estimate of $2.97 billion. Specifically, the Etsy marketplace’s GMS was $2.5 billion, down 6% from the prior year.
Operating Expenses on the Rise
In the third quarter of 2024, Etsy’s total operating expenses reached $389.95 million, an increase of 8.6% from the prior-year quarter. This represented 58.9% of revenues, up from 56.4% in the same quarter last year.
Marketing expenses surged by 22.1% year over year to $196.5 million, accounting for 29.7% of sales, an increase of 440 basis points. Conversely, product development expenses decreased by 5.9% to $107.3 million.
General and administrative expenses rose 2.5% to $86.2 million, making up 13% of sales, which was a slight decrease in percentage terms.
Consequently, Etsy reported an operating income of $86.8 million, down from $88.6 million in the prior-year quarter.
Balance Sheet Shows Improvements
As of September 30, 2024, Etsy’s cash and cash equivalents totaled $818.94 million, up from $759.21 million as of June 30, 2024. Short-term investments decreased to $226.02 million, down from $240.68 million in the previous quarter, while long-term debt remained stable at $2.29 billion.
Q4 Outlook Lacks Optimism
For the fourth quarter of 2024, Etsy projects the take rate to be 22.3%. Gross Merchandise Sales (GMS) are expected to decline in a low to mid-single-digit percentage range year-over-year. The adjusted EBITDA margin is anticipated to be between 28% and 29%.
Etsy’s Zacks Ranking and Other Stocks to Consider
Currently, Etsy carries a Zacks Rank #3 (Hold).
CyberArk Software CYBR, DXC Technology DXC, and EPAM Systems EPAM are better-ranked stocks to consider within the broader Zacks Computer & Technology sector, each with a Zacks Rank #2 (Buy).
CyberArk Software shares have climbed 26.2% year to date and will report their third-quarter 2024 results on November 13. DXC Technology shares have decreased 13.1% year to date and will report on November 7. Meanwhile, EPAM Systems shares have seen a decline of 36.5% year to date, with their earnings report scheduled for November 7.
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