What happened
Shares of online marketplace Etsy (ETSY 2.47%) soared on Wednesday, rising as much as 24.1% following the company's fourth-quarter earnings release. The stock is up about 21% at the time of this writing.
Positive sentiment toward the stock from investors on Wednesday is likely a reflection of Etsy posting accelerating growth across a range of key metrics, as well as posting higher-than-expected revenue, adjusted earnings per share, and guidance.
Etsy headquarters. Image source: Etsy.
So what
Etsy reported fourth-quarter revenue of $136.3 million, up 23.6% year over year and ahead of a consensus analyst estimate for revenue of about $133 million. Earnings per share swung from a loss of $0.19 in the year-ago quarter to a profit of $0.15 when adjusted to exclude a one-time benefit from the U.S. Tax Cuts and Jobs Act of 2017. Analysts, on average, were expecting adjusted earnings per share of $0.09.
Importantly, gross merchandise sales (GMS) surpassed $1 billion for the first time and increased at an accelerated rate. GMS increased 17.8% year over year, to $1.02 billion. This is up significantly from 13.2% year-over-year GMS growth in Q3.
Helping fourth-quarter profitability was Etsy's record adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of 25.6%, up from 13.9% in the year-ago quarter.
Now what
Management's optimism for 2018 is unmistakable. The company guided for revenue to rise 21% to 23% in 2018, up from year-over-year growth of 20.9% in 2017. Further, based on the midpoint of management's guidance range for year-over-year growth in GMS, Etsy also expects an acceleration in GMS in 2018. The company said it expects GMS to rise 14% to 16% in 2018, up from 14.5% in 2017.
"We are well-positioned for a strong 2018 and our revenue and adjusted EBITDA guidance demonstrate that we believe we can sustain and build upon our 2017 progress," said Etsy CFO Rachel Glaser.
