Etsy (NASDAQ:ETSY) Exceeds Q1 Expectations, Stock Soars

Radek Strnad /
2023/05/03 4:09 pm EDT
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Online marketplace Etsy (NASDAQ: ETSY) reported Q1 FY2023 results topping analyst expectations, with revenue up 10.6% year on year to $640.9 million. However, guidance for the next quarter was less impressive, coming in at $615 million at the midpoint, being 1.57% below analyst estimates. Etsy made a GAAP profit of $74.5 million, down on its profit of $86.1 million, in the same quarter last year.

Is now the time to buy Etsy? Access our full analysis of the earnings results here, it's free.

Etsy (ETSY) Q1 FY2023 Highlights:

  • Revenue: $640.9 million vs analyst estimates of $620.9 million (3.21% beat)
  • EPS: $0.53 vs analyst estimates of $0.51 (4.35% beat)
  • Revenue guidance for Q2 2023 is $615 million at the midpoint, below analyst estimates of $624.8 million
  • Free cash flow of $47.4 million, down 83.3% from previous quarter
  • Gross Margin (GAAP): 69.5%, in line with same quarter last year
  • Active Buyers: 95.5 million, up 424 thousand year on year

"We are pleased that Etsy has once again delivered solid top and bottom line performance in the first quarter, maintaining the vast majority of our pandemic gains in the face of stiff macroeconomic headwinds," said Josh Silverman,

Founded by a struggling amateur furniture maker Robert Kalin and his two friends, Etsy (NASDAQ: ETSY) is one of the world’s largest online marketplaces, focusing on handmade or vintage items.

Marketplaces have existed for centuries. Where once it was a main street in a small town or a mall in the suburbs, sellers benefitted from proximity to one another because they could draw customers by offering convenience and selection. Today, a myriad of online marketplaces fulfill that same role, aggregating large customer bases, which attracts commission paying sellers, generating flywheel scale effects which feed back into further customer acquisition.

Sales Growth

Etsy's revenue growth over the last three years has been exceptional, averaging 53.6% annually. This quarter, Etsy beat analyst estimates but reported a mediocre 10.6% year on year revenue growth.

Etsy Total Revenue

Guidance for the next quarter indicates Etsy is expecting revenue to grow 5.1% year on year to $615 million, slowing down from the 10.6% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 6.74% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Usage Growth

As a online marketplace, Etsy generates revenue growth both by growing the number of buyers on the platform and the average buyer size in dollars.

Over the last two years the number of Etsy's active buyers, a key usage metric for the company, grew 13.6% annually to 95.5 million. This is a solid growth for a consumer internet company.

Etsy Active Buyers

In Q1 the company added 424 thousand active buyers, translating to a 0.45% growth year on year.

Key Takeaways from Etsy's Q1 Results

With a market capitalization of $12.2 billion, more than $1.04 billion in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

It was good to see Etsy outperform Wall St’s revenue expectations this quarter. That feature of these results really stood out as a positive. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations and the revenue growth was quite weak. Overall, this quarter's results were mostly in line. The company is up 8.1% on the results and currently trades at $107.02 per share.

Etsy may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.