One of last year's hottest stocks will be in the earnings spotlight next week. Etsy (NASDAQ:ETSY) reports its fourth-quarter results after Monday's market close, and expectations are high, going by its buoyant shares. 

Etsy stock has soared 159% since the start of last year, fueled by a healthy string of blowout financial reports and a well-received seller fee hike that is juicing up bottom-line results. The shares hit fresh all-time highs earlier this month. The arts and crafts online marketplace operator has come a long way since it was fending off the threat of dot-com juggernauts and handing out pink slips two years ago. The near-term prospects remain bright, but bulls need to be careful that too much of that optimism isn't already baked into the share price. 

Etsy headquarters in Hudson.

Image source: Etsy.

Beat poetry 

Expectations are high heading into Monday afternoon's earnings release. Analysts see revenue soaring 43% to $194.9 million for the fourth quarter, making this Etsy's seventh consecutive quarter of accelerating top-line growth. 

The obvious catalyst to Etsy's putting the pedal to the metal was its move this past June to boost its selling fees. Etsy went from collecting 3.5% of any successful transaction to collecting 5%. The 150 basis points may not seem like much, but it's naturally a pretty big deal on a percentage basis. The challenge is keeping the artisans on Etsy happy enough to accept the move, and for now that's been a big success. 

Instead of pocketing all the newfound fees, Etsy's been investing in improving the user discovery experience and boosting conversion rates. The initiatives are working. Etsy's seller base has grown by only 8% over the past year, but gross merchandise sales volume is up a hearty 20% in that time. 

Wall Street sees a decline in profitability -- with earnings per share slipping to $0.21 from $0.36 a year earlier -- but that's not as bad as it sounds. More than half of the prior year's fourth-quarter income came from a $26.5 million tax benefit related to the U.S. Tax Cuts and Jobs Act of 2017. Adjusted earnings should continue to inch higher, and even the $0.21 a share that Wall Street pros are targeting should prove conservative.

Etsy has done nothing but blast through analyst profit projections with ease during the past year and change

Quarter EPS Estimate EPS Actual Surprise
Q4 2017 $0.09 $0.36 300%
Q1 2018 $0.06 $0.10 67%
Q2 2018 $0.04 $0.07 75%
Q3 2018 $0.07 $0.15 114%

Data source: Yahoo! Finance.

Momentum is in Etsy's corner as we head into next week's report. Etsy should also initiate guidance for 2019 on Monday, giving investors an important snapshot for where the dot-com darling sees its business going in the year ahead. The stock may be trading at colorful levels, but that's the kind of palette its artsy sellers and buyers can appreciate.