Etsy Is 'Caught Between Maintaining Margins And Spurring Growth,' 6 Analysts Dive Into Q1 Results

Zinger Key Points
  • Etsy reported Q1 revenues of $646mn and adj. EBITDA of $168mn, with Easter being a bigger headwind than anticipated, one analyst said.
  • The company guided to GMS decline for Q2 due to a tough discretionary demand environment in March and April, another analyst added.

Shares of Etsy Inc ETSY tanked in early trading on Thursday, after the company reported downbeat results for its first quarter.

Here are some key analyst takeaways from the release.

  • Goldman Sachs analyst Eric Sheridan maintained a Neutral rating, while reducing the price target from $80 to $70.
  • Truist Securities analyst Youssef Squali reaffirmed a Buy rating, while cutting the price target from $85 to $75.
  • Wedbush analyst Seth Basham reiterated a Neutral rating, while slashing the price target from $70 to $65.
  • Oppenheimer analyst Jason Helfstein maintained an Outperform rating, while cutting the price target from $80 to $75.
  • Needham analyst Anna Andreeva reaffirmed a Buy rating, while reducing the price target from $95 to $75.
  • KeyBanc Capital Markets analyst Ashley Owens reaffirmed a Sector Weight rating on the stock.

Check out other analyst stock ratings.

Goldman Sachs: Etsy's first-quarter operating performance disappointed, with Etsy Marketplace GMS (gross merchandise sales) down 5.6% year-on-year ex-foreign exchange, "despite marketing intensity stepping-up in the quarter with mgmt. highlighting that trends did not improve as expected in March," Sheridan said in a note.

Management guided to Consolidated GMS declining by 4% year-on-year in the second quarter, "as the sustained pressure on discretionary consumer spending is expected to continue to outrun the positive contribution of recent marketing campaigns and product launches," the analyst wrote. "We now model 2024 GMS -3% YoY as mgmt. only expects GMS to modestly accelerate in 2H," he added.

Truist Securities: Etsy's quarterly results were broadly in-line with consensus, with revenues of $646 million and adjusted EBITDA of $168 million, Squali said. "Here, we note that Easter (+ Spring Break travel) was a slightly bigger headwind to growth than anticipated," he added.

"Etsy core marketplace GMS was down 5.3% y/y (-5.6% FXN) in the quarter," the analyst wrote. "Importantly, active buyers on the core Etsy marketplace grew 2% y/y in the quarter (to 92M) vs. 3% y/y growth in 4Q23 and roughly flat sequentially, remaining at record levels," he further stated.

Wedbush: Etsy missed GMS expectations and issued a "subdued" guidance for the second quarter due to "a more adverse discretionary demand environment in March and April," Basham said.

"Further, the reiterated full-year outlook incorporates a sharper acceleration in 2H than originally expected, creating more risk to the downside should ETSY's marketing and product investments fail to yield their expected benefits while the underlying demand environment remains soft," he added.

Oppenheimer: Management is "caught between maintaining margins and leaning into growth," Helfstein said, while adding that more marketing is "unlikely to offset macro/vertical headwinds."

"1Q should mark the trough in GMS declines," the analyst wrote. While weaker trends in March caused the miss, April has improved, although comps get "progressively tougher" through the second quarter, he added.

Needham: With the demand environment continuing to decline, "the decision for ETSY is to manage the business for profitability or to reinvest into growth," Andreeva said. "Management views high revenue/employee KPI as a key metric in choosing the former.”

"ETSY added $1.5B to GMS through incremental initiatives, and the plan is for ’24 contribution to be even greater – albeit this is being offset by the base of the business continuing to erode," the analyst further stated.

KeyBanc Capital Markets: Etsy's first-quarter marketplace revenue was almost flat due to growth in payments and offsite ads being offset by lower transaction fees on lower GMS, Owens said. "Encouragingly, marketplace active buyers +2% y/y (~flat to 4Q23), added 6M new buyers in a challenged environment, and reactivated 6M buyers during the quarter (+6% y/y)," he added.

"ETSY expects a modest acceleration in consol. GMS y/y in the back half due to the stacking of results from investments in gifting, product, quality, differentiation, etc," the analyst wrote. "We view ETSY’s execution in the current environment positively; however, we await a more stable backdrop to become constructive," he further stated.

ETSY Price Action: Shares of Etsy had declined by 16.97% to $57.90 at the time of publication on Thursday.

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Posted In: Analyst ColorEarnings MissesPrice TargetReiterationAnalyst RatingsMoversTrading IdeasAnna AndreevaAshley OwensEric SheridanExpert IdeasGoldman SachsJason HelfsteinKeyBanc Capital MarketsNeedhamOppenheimerSeth BashamStories That MatterTruist SecuritiesYoussef Squali
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