What happened
Shares of online retailer of handmade goods and crafts Etsy (ETSY +0.60%) rose another 4% through 10:50 a.m. ET on Thursday. And yes, part of the reason for this was Federal Reserve Chair Jerome Powell's reassuring comments about inflation and interest rates yesterday.
But also part of the reason Etsy keeps going up -- part of the reason the stock has moved higher for three straight days -- is due to Etsy itself, and the good news surrounding it.
NYSE: ETSY
Key Data Points
So what
As stock markets awoke from their tryptophan coma on Monday, stock-watcher StreetInsider happily reported that Black Friday shopping levels set a new record last week, with shoppers online in particular spending more than $9.1 billion -- 2.3% more than last year.
And it's not just e-commerce in general that's booming. This morning, San Francisco investment bank BTIG commented that Etsy in particular seems to be doing better than expected. As ratings-watcher The Fly reports this morning, BTIG is saying that shoppers were spending more on Etsy over Black Friday than even Etsy's own management had expected, implying that sales this quarter might be toward the high end of management's guidance for $3.6 billion to $4 billion in gross merchandise volume (GMV).
Now what
What does this imply for Etsy when it next reports earnings in February? Well, last quarter, Etsy management was rather conservative on the guidance front, telling investors its revenue for the fourth quarter of 2022 might grow as little as 3.2%, to about $740 million at the midpoint of guidance. Wall Street is expecting Etsy to do a little better than that, forecasting sales of $747 million, or about 1% more than Etsy promised.
But if Etsy maxes out its GMV -- 5% above the midpoint -- the implication is that revenue might be 5% higher than the midpoint of guidance as well, and perhaps as high as $777 million. It's a bit less certain what that would mean for earnings, but even a sales beat might be good enough news to lift Etsy stock. Anticipating this, BTIG raised its price target on Etsy stock from $119 to $137 today -- which perhaps not coincidentally is almost exactly what the stock now costs.
Granted, that still leaves Etsy valued at about 25 times free cash flow -- and 50 times forward earnings -- which isn't exactly a bargain price. Personally, I wouldn't be a buyer of Etsy stock at these prices, but to each their own.
