Shares of Etsy Inc. ETSY jumped 7.6% to close at $14.54 on Sep 21 following an upgrade by an analyst from Monness Crespi Hardt. Per MarketWatch, the analyst raised the rating from neutral to buy and noted "underappreciated areas of the business that can yield positive surprises in the coming quarters."
Notably, Etsy shares have surged more than 76% on a year-to-date basis. Although the e-commerce service provider is yet to report profits, revenues of $85.3 million soared 39.1% from the year-ago quarter and beat the Zacks Consensus Estimate of $83 million in the second quarter of 2016.
Most importantly, active sellers grew 11.5% on a year-over-year basis, while active buyers grew 20.3%. Etsy ended the quarter with approximately 1.7 million active sellers and 26.1 million active buyers.
Upbeat Full-year 2016 View
Based on the strong results, Etsy now expects full-year 2016 revenues to grow 25-28%, up from the higher end of its 3-year guidance, which ranged between 20% and 25%. The Zacks Consensus Estimate for revenues is currently pegged at $89.9 million for the third quarter, which reflects year-over-year growth of almost 37%.
Etsy is still expected to report loss in the third quarter of 2016. However, the Zacks Consensus Estimate of a loss of 4 cents has narrowed down from a loss of 5 cents over the last 60 days. However, the company is anticipated to report profit in the fourth quarter of 2016.
Acquisition to Boost Search Capabilities
Meanwhile, Etsy recently announced the acquisition of privately-held Blackbird Technologies, which has developed algorithms for natural language processing, image recognition and analytics. The start-up’s deep expertise in Artificial Intelligence is expected to improve its search features.
Per Etsy’s CEO Chad Dickerson, the addition of Blackbird’s technology will “enhance the buyer experience by making search quicker and easier and by surfacing even more relevant, tailored product recommendations.” This will eventually improve Etsy’s competitive position against Amazon’s AMZN Handmade store at least in the near term.
Zacks Rank & Key Picks
Etsy has a Zacks Rank #3 (Hold). Better-ranked stocks include Facebook FB and Yirendai YRD. Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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