The story of the past quarter has been the strong performance of Internet stocks. And now, these gains are being validated by their earnings reports. Etsy
Etsy is an e-commerce platform that is focused on handmade or vintage, craft items. The site is modeled on a craft fair, where anyone can open their storefront and list items for $0.20 each. It also offers services for sellers to help market products on and off the platform.
With most real-life craft fairs shutdown, it makes sense that Etsy saw an influx of users with the company reporting 18.9 million, new buyers, and another 2 million sellers.
Going forward, it will be interesting to see how many of these users will be retained by the company even if the economy begins to reopen. Based on Etsy's forecasts from 2019, the company is hitting goals for its platform that it was initially expecting to reach in 2023.
Inside the Numbers
Etsy reported earnings of $0.75 per share which was above expectations of $0.39 per share. Revenue also beat by a significant margin at $429 million versus expectations of $330 million. Gross market sales which measure the total amount of products sold on the platform was higher by 147% compared to 2019's Q2 to reach $2.7 billion.
The company's forecast for the third quarter was also above expectations of $279 million. It's projecting revenues between $366 million and $426 million. It's also invested in new features to help sellers develop products and an augmented reality app that lets buyers imagine products in their homes.
Stock Price Impact
Year to date, Etsy is up 221%, and it's up 336% from the March lows. From its IPO in April 2015 at $15, the stock is 715% higher. Etsy's growth has come despite Amazon
These efforts have failed, and Etsy is the dominant company in its niche. The good and bad thing about Internet businesses is that they tend to be winner-take-all. People go to the platform with the best sellers and items. Sellers go to the platforms with the most buyers. Therefore, investors don't seem concerned about earnings or expenses, when companies are in growth mode.
Interestingly, Etsy's stock was higher after hours but closed down 3.5%. While the company beat analysts' expectations, investors and traders were less impressed. Given its huge run, the stock is due for some sort of consolidation, however, it's set to outperform over the next couple of years given its entrenched position, high margins, and rapid growth.
