What happened
Shares of Etsy (ETSY +0.56%) gained 27.1% in November, according to data provided by S&P Global Market Intelligence. The company recorded another quarter of strong sales and earnings growth, helping to send its stock to a new lifetime high last month.
Etsy reported third-quarter earnings after market close on Nov. 6, delivering sales and earnings that came in ahead of the market's expectations. The business delivered earnings per share of $0.15 on revenue of $150.3 million, beating the average analyst estimate's call for earnings of $0.06 on sales of $149.8 million.
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So what
Etsy has been posting strong growth powered by an increase in sales conducted across its platform and pricing increases for its services. Third-quarter sales grew 41.3% compared to the prior-year period, and gross merchandise sales (GMS) conducted through the platform rose 20.4%. Net income for the period actually fell 22.9% year over year to $19.9 million, but this decline was primarily due to the tax impact from debt securities offered by the company, and adjusted EBITDA for the period was up 49.5% year over year to reach $34 million. Strong performance in the quarter prompted the company to raise its full-year revenue, GMS, and adjusted EBITDA targets.
Now what
Etsy's midpoint target projects full-year gross merchandise sales to come in at $3.85 billion, representing growth of 19.5% -- up from its previous midpoint growth target of 19%. Its midpoint revenue growth target was raised from 34% to 35.5%, with sales now expected to come in at roughly $3.85 billion. Midpoint expectations for adjusted EBITDA were raised to $135 million, up from the previous midpoint target of $130 million. Shares trade at roughly 69 times the year's expected earnings and 11 times expected sales.
Etsy has been successfully expanding its user base and increasing per-user engagement and has a range of initiatives underway to keep that momentum alive. The company is looking at ways to increase personalization and customization on its e-commerce platform and for goods sold through it, expand awareness through marketing campaigns, find more efficient ways to handle shipping, and improve its search engine to provide a better experience for both sellers and buyers.
