Things keep looking up for Etsy (NASDAQ:ETSY) investors. Shares of the arts and crafts marketplace operator soared 22% last week, hitting a fresh 52-week high after posting better-than-expected financial results. Etsy stock has now more than doubled over the past year. 

Revenue rose 24% to $136.3 million, as a 33% spike in services revenue helped lift a 16% uptick in marketplace revenue. Gross merchandise sales topped $1 billion for the first time in any quarter. A one-time tax benefit padded bottom-line results, but Etsy still would've posted a hearty profit to reverse a year-ago loss during the seasonally potent holiday quarter. This is the third time in a row that Etsy blasted through Wall Street's profit targets. 

Etsy offices in Hudson.

Image source: Etsy.

Crafting a turnaround

It's been a wild year of redemption for Etsy. Things started out with unimpressive first-quarter results, layoffs, and the departure of its CEO and CTO. Short-lived gains in the stock were often the result of buyout chatter

Etsy is in a much better place now. Active buyers and sellers on the platform have risen by 17% and 11%, respectively, so the marketplace is working for both parties. Etsy's getting better at cashing in on the transactions by orchestrating payments and fulfillment as well as giving artisans a better shot at standing out through sponsored listings. 

International transactions have grown to account for a third of gross merchandise sales. Two-thirds of Etsy's traffic is now coming from mobile devices. Year-over-year revenue gains have accelerated for three consecutive quarters. 

Etsy's outlook for the year ahead is encouraging. It sees gross merchandise sales climbing 14% to 16%, ultimately resulting in 21% to 23% revenue growth. 

A few analysts got more optimistic following the strong showing. Darren Aftahi at Roth Capital upgraded the stock from "neutral" to "buy," excited by margin expansion and the reacceleration of growth. He's lifting his price target from $20.50 to $28.

Tom Forte at DA Davidson is raising his price target from $26 to $28. His potential catalysts to keep the rally going include improving mobile conversion, better matching of international buyers with sellers from the same country, and the continuing positive impact of the new management team. 

Etsy is cashing in on the cost-cutting measures that rolled out through 2016 and 2017, giving its scalable model a real lift here. Etsy no longer needs to be exploring strategic alternatives as a way to unlock value for shareholders. Growing its business is paying off, rewarding investors with big gains last year and last week.


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