Etsy (NASDAQ:ETSY) Q2 Sales Beat Estimates But Quarterly Guidance Underwhelms

Kayode Omotosho /
2022/07/27 4:23 pm EDT
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Online marketplace Etsy (NASDAQ: ETSY) beat analyst expectations in Q2 FY2022 quarter, with revenue up 10.6% year on year to $585.1 million. However, guidance for the next quarter was less impressive, coming in at $557.5 million at the midpoint, being 2.18% below analyst estimates. Etsy made a GAAP profit of $73.1 million, down on its profit of $98.2 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) Q2 FY2022 Highlights:

  • Revenue: $585.1 million vs analyst estimates of $556.8 million (5.07% beat)
  • EPS (GAAP): $0.51
  • Revenue guidance for Q3 2022 is $557.5 million at the midpoint, below analyst estimates of $569.9 million
  • Free cash flow of $117.7 million, up 134% from previous quarter
  • Gross Margin (GAAP): 70.7%, down from 71.8% same quarter last year
  • Active Buyers: 93.9 million, up 3.45 million year on year

"Our second quarter results once again reflect that Etsy has maintained most of our pandemic gains, and that we are able to deliver strong bottom line performance while simultaneously investing in key initiatives," 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 exceptional, averaging 59.1% 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 but reported an mediocre 10.6% year on year revenue growth.

Guidance for the next quarter indicates Etsy is expecting revenue to grow 4.7% year on year to $557.5 million, slowing down from the 17.9% 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 9.37% 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 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 34.6% annually to 93.9 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 Q2 the company added 3.45 million active buyers, translating to a 3.82% growth year on year.

Key Takeaways from Etsy's Q2 Results

Sporting a market capitalization of $11.8 billion, more than $1 billion 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.

We liked to see that Etsy beat analysts’ revenue expectations pretty strongly 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 still quite weak. Overall, it seems to us that this was a complicated quarter for Etsy. The company is up 3.68% on the results and currently trades at $99 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.

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