Etsy Looks to M&A, Ad Tools to Lift Sales -- What to Watch

Date : 10/30/2019 @ 1:26PM
Source : Dow Jones News
Stock : eBay Inc (EBAY)
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Etsy Looks to M&A, Ad Tools to Lift Sales -- What to Watch

Etsy (NASDAQ:ETSY)
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6 Months : From Aug 2019 to Feb 2020

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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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