Etsy (NASDAQ:ETSY) Exceeds Q4 Expectations, Stock Soars

Kayode Omotosho /
2022/02/24 4:17 pm EST

Online marketplace Etsy (NASDAQ: ETSY) reported Q4 FY2021 results beating Wall St's expectations, with revenue up 16.1% year on year to $717.1 million. However, guidance for the next quarter was less impressive, coming in at $577.5 million at the midpoint, being 8.26% below analyst estimates. Etsy made a GAAP profit of $161.5 million, improving on its profit of $148.5 million, in the same quarter last year.

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Etsy (ETSY) Q4 FY2021 Highlights:

  • Revenue: $717.1 million vs analyst estimates of $685.4 million (4.62% beat)
  • EPS (GAAP): $1.11
  • Revenue guidance for Q1 2022 is $577.5 million at the midpoint, below analyst estimates of $629.5 million
  • Free cash flow of $268 million, up 184% from previous quarter
  • Gross Margin (GAAP): 70.8%, down from 75.5% same quarter last year
  • Active Buyers: 90.1 million, up 8.2 million year on year

"Even in a world of greatly expanded choice, Etsy remained top of mind for consumers, leading to our delivery of record levels of GMS, revenue, and adjusted EBITDA in the fourth quarter," said Josh Silverman, Etsy, Inc. Chief Executive Officer.

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 incredible, averaging 64.2% annually. The initial impact of the pandemic was positive for Etsy's revenue, but growth rates subsequently normalized.

Etsy Total Revenue

This quarter, Etsy beat analyst estimates and reported a moderate 16.1% year on year revenue growth.

Guidance for the next quarter indicates Etsy is expecting revenue to grow 4.87% year on year to $577.5 million, slowing down from the 141% year-over-year increase in revenue the company had recorded in the same quarter last year.

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Usage Growth

As a online marketplace, Etsy generates revenue growth both by growing the number of buyers using the platform and how much each of those buyers spends.

Over the last two years the number of Etsy's active buyers, a key usage metric for the company, grew 44% annually to 90.1 million users. This is among the fastest growth of any consumer internet company, indicating that users are excited about the offering.

Etsy Active Buyers

In Q4 the company added 14.4 million active buyers, translating to a 17.6% growth year on year.

Key Takeaways from Etsy's Q4 Results

Sporting a market capitalization of $14.7 billion, more than $984.6 million in cash and with positive free cash flow over the last twelve months, we're confident that Etsy has the resources it needs to pursue a high growth business strategy.

It was good to see Etsy outperform Wall St’s revenue expectations this quarter. And we were also glad to see the user growth. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations. Overall, this quarter's results were mixed. The company is up 5.08% on the results and currently trades at $135 per share.

Should you invest in Etsy 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.

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