Etsy Looks to M&A, Ad Tools to Lift Sales -- What to Watch
October 30 2019 - 9:26AM
Dow Jones News
By Bowdeya Tweh
Etsy Inc. (ETSY) reports financial results for its third quarter
after the bell Wednesday. Here's what you need to know:
EARNINGS FORECAST: The online marketplace operator is expected
to report a profit of 12 cents a share, according to analysts
surveyed by FactSet. A year earlier, Etsy's profit was 15 cents a
share.
Analysts expect an adjusted profit of 21 cents a share, down
from 22 cents a share a year earlier. Those numbers exclude items
Wall Street believes aren't a regular part of business.
Shares in Etsy have gained about 14% this year, compared with a
21% increase for the S&P 500.
REVENUE FORECAST: Etsy didn't provide an outlook for the third
quarter, during which it completed an acquisition of a closely held
company whose contribution may not be reflected in analysts'
projections. Those polled by FactSet expect quarterly sales of
$193.3 million, which would be up 29% from the year-earlier period.
Gross merchandise sales, a closely watched measurement of the value
of goods sold on Etsy, are expected to rise 23% to $1.13 billion,
according to analysts.
WHAT TO WATCH:
NEW AD PLATFORM. Etsy combined two advertising tools it offers
sellers to create a unified platform called Etsy Ads that launched
in August. D.A. Davidson analyst Tom Forte said the initiative
could be a strong catalyst for sales growth. "They've done a really
good job finding opportunities to improve the business and this
seems like the latest example to us," he said. One potential
hiccup, though, is some sellers find Etsy Ads too complex from an
accounting standpoint, Mr. Forte said.
FREE SHIPPING NUDGE. Early in the third quarter, Etsy began
providing sellers world-wide with tools and educational resources
to help them adopt a free shipping guarantee for U.S. buyers. Etsy
also began giving priority placement in U.S search results to items
that ship free and to shops that guarantee U.S. buyers free
shipping on orders of $35 or more. Analysts will be looking for
signs of whether those efforts are boosting gross merchandise sales
and overall revenue for the company.
WELCOME REVERB. In August, Etsy completed its acquisition of
Reverb Holdings Inc., a closely held marketplace for new, used and
vintage music gear, for roughly $275 million in cash. The deal
likely muddied Wall Street's outlook for the third quarter,
according to Wedbush Securities. "As we don't expect consensus
estimates to include Reverb, results won't be apples to apples,"
the investment firm said. "We'll be more focused on 4Q
commentary."
CEO FLIGHT RISK. Etsy competitor and online marketplace
juggernaut eBay Inc. (EBAY) is looking for a new chief executive,
and D.A. Davidson's Mr. Forte considers Etsy's top boss, Josh
Silverman, "a natural candidate" given his prior experience at the
company and understanding of the online marketplace business model.
He said he'll be listening on Etsy's earnings call for comments
from Mr. Silverman on the executive's future plans.
Write to Bowdeya Tweh at bowdeya.tweh@wsj.com
(END) Dow Jones Newswires
October 30, 2019 09:11 ET (13:11 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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