2 Catalysts Coming For Etsy Investors

Investors of Etsy Inc ETSY should look for commentary on two potential upcoming catalysts when the company announces its quarterly numbers next week, according to Brean Capital analyst Tom Forte. Shares gained as much as 12.5 percent on Wednesday, as investors have regained confidence in the prospects of the company.

Etsy will be reporting its fourth-quarter numbers on February 23. Wall Street expects the e-commerce firm to report a loss of 1 cent a share for the quarter and 56 cents a share for the full year. Revenues are expected at $86.71 million for the quarter and $$272.16 million for the full year.

A Closer Look At Etsy

Related Link: Brean Sees Etsy Shares "Attractive Heading Into Quarter" Image Credit: Public Domain

Forte said, "While recognizing the US dollar strengthened sequentially (in 4Q15) vs. a basket of currencies from Etsy's largest international markets and the US dollar appears to remain strong for some time, we still see lapping the period when the strengthening US dollar began to really dampen Etsy's international GMS, as a potential catalyst for its 2016 international GMS performance and therefore the stock."

The analyst sees international GMS (gross merchandise sales) growth to reaccelerate in 2016 to 19.9 percent compared to 16.5 percent for 2015.

Meanwhile, the company has a number of initiatives underway to drive mobile usage frequency and engagement. There have been more than 30 million downloads of its mobile apps as of third quarter 2015.

"When considering conversion rates on Etsy's mobile app are twice those on its desktop/laptop website, we see the company's efforts to drive usage of its mobile app as a potential near-term catalyst for shares." Forte noted.

The analyst projects mobile GMS to increase 37.6 percent to $311million, which would represent 43.5 percent of total GMS. Depending on the success of its efforts to drive mobile, when considering the superior conversion rates, there could be upside to his current mobile GMS growth estimate of 30.5 percent for 2016, which compares against our projection of 45.8 percent for 2015.

More than 4.5 million shares of ETSY have changed hands on Wednesday versus its 3-month average volume of 998,000 shares. They have been trading between $6.04 and $35.74 during the past 52 weeks. Forte has a Buy rating and price target of $20 on Etsy stock, which closed Wednesday at $8.17.