DJ Etsy Soars Ahead of Earnings. Here's the Secret to Its Sales Growth. -- Barrons.com

By Eric J. Savitz

Etsy shares are on the rise as investors anticipate big things from the online crafts marketplace when it reports second-quarter earnings after the close of trading on Wednesday.

Etsy (ETSY) shares have been driven in particular by its growing role as a seller of custom face masks during the Covid-19 pandemic. When it reported first-quarter results, Etsy projected second-quarter revenue of $310 million to $340 million, up between 70% and 90%, with gross merchandise sales of $2 billion to $2.2 billion, up 80% to 100%. The company said adjusted Ebitda would range from $75 million to $90 million. Street consensus calls for revenues of $330 million and profits of 39 cents a share.

But if the past is prelude, there is reason to think that the company could blow past estimates. Last week, Amazon (AMZN) posted June quarter sales that were dramatically above its own guidance, Shopify (SHOP) likewise crushed Street estimates for the quarter and eBay (EBAY) had above-consensus sales for the quarter.

Needham analyst Rick Patel on Monday repeated his Buy rating on the stock, lifting his price target to $130, from $88.

"Etsy's stock performance suggests the market is anticipating strong results, and we believe the company will deliver," he writes in a research note. Patel notes that strong face mask demand drove acceleration in gross merchandise sales early in the quarter, and he says surveys suggest demand for face masks should stay strong in the third quarter. He also asserts that "the majority of customers new to Etsy are likely to become loyal ones, which should drive long-term growth."

Etsy on Monday is up 5.8%, to $125.27. The stock is up 183% year to date.

Write to Eric J. Savitz at eric.savitz@barrons.com

(END) Dow Jones Newswires

August 03, 2020 13:42 ET (17:42 GMT)

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