Etsy experiences a 12% drop in shares due to underwhelming guidance

Etsy







shares witnessed a decline of over 12% on Thursday afternoon following the company’s release of better-than-expected second-quarter results, coupled with weak guidance for third-quarter revenue and gross merchandise sales, or GMS.

Let’s take a look at the company’s performance:

• Earnings: $0.45 per share, adjusted, surpassing analysts’ expectations of $0.43 per share, according to Refinitiv.
• Revenue: $629 million, beating analysts’ expectation of $619 million, according to Refinitiv.

Etsy’s projection for third-quarter revenue stands between $610 million and $645 million, falling short of the $632 million analyst estimate from Refinitiv. The projected GMS, measuring the total number of goods sold over a certain period, ranges between $2.95 billion and $3.1 billion, missing the survey’s midpoint expectation of $3.04 billion by Refinitiv analysts.

The disappointing guidance overshadowed an otherwise exceptional second-quarter report. Etsy outperformed predictions on both top and bottom lines, with GMS reaching $3 billion, exceeding the $2.98 billion expectation. Notably, services revenue, encompassing advertising and more, experienced a significant sales boost of approximately 21% year over year.

During an analyst call, Etsy CFO Rachel Glaser highlighted the potential impact of the return of student loan payments and the elimination of child tax credits on consumer spending and GMS in the third quarter.

CEO Josh Silverman acknowledged the persistently challenging macro environment. Etsy, famous for its handmade and artisan goods, enjoyed substantial sales growth during the pandemic as consumers increasingly turned to digital retailers. The company’s revenue tripled in 2020, largely driven by face mask sales.

“In recent years, Etsy has experienced tremendous growth with favorable market conditions. However, we are now facing strong headwinds and uncertain macroeconomic conditions,” said Silverman. “Consumers are making difficult decisions regarding their spending, and we are working hard to assist our sellers in maximizing their share.”

Even Etsy isn’t immune to the AI revolution captivating Silicon Valley. Silverman assured investors that Etsy has a skilled team of AI and machine learning experts incorporating these technologies into various customer touchpoints, including tools for sellers and personalized shopping recommendations.

“We want to avoid homogeneity or monotony on our site,” Silverman added. “Therefore, we will approach this cautiously. Additionally, it’s important to note that more listings don’t necessarily translate into increased sales for Etsy. We will focus on providing useful tools for sellers.”