Etsy: Shares No Longer A Steal After The Big Rally, Earnings On Tap

1 year ago

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Etsy (NASDAQ:ETSY) sports precocious maturation aft this twelvemonth pinch affirmative free rate flow. It's not your emblematic speculative discretionary stock. I'm a hold, though, arsenic nan valuation is nary longer inexpensive aft shares person much than doubled off nan June 2022 low.

The rally is not each that astonishing fixed nan monolithic spot successful nan American user arsenic evidenced by nan January Retail Sales information and precocious beardown card-spending figures from BofA. More clues connected nan user will beryllium seen successful Etsy's Q4 study adjacent week.

Consumers Doing What They Do Best

According to Bank of America Global Research, Etsy is simply a US-based e-commerce institution that operates online marketplaces connecting astir 100mn buyers and 9mn sellers globally. It specializes successful handmade and/or vintage items, art, and trade supplies. As of 2021, Etsy generated $13.5bn successful gross merchandise income and $2.3bn successful full revenues. Revenue is chiefly generated from listing and transaction fees, seller services specified arsenic advertising, and shipping labels.

The New York-based $16.8 cardinal marketplace headdress Internet and Direct Marketing Retail manufacture institution wrong nan Consumer Discretionary assemblage trades astatine a precocious 34.9 trailing 12-month operating price-to-earnings ratio and has antagonistic GAAP net complete nan past 12 months (care of a awesome one-time impairment charge reported successful its Q3 study past year) while not paying a dividend, according to The Wall Street Journal.

Etsy has emerged arsenic a high-margin marketplace that is differentiated from different ample retailers, helping to make this maturation stock's net and free rate travel positive. With coagulated income maturation now, and reliable 2021 comps having passed, amended net header consequence is likely. Key risks up of nan Q4 study see really discretionary spending holds up, but caller retail sales information propose Americans support connected spending. That optimism has been reflected successful ETSY's rebounding stock value this year. Watch retired for clues connected really nan patient is gaining penetration into caller markets arsenic good arsenic gaining marketplace stock successful existing regions and pinch existent demographics.

On valuation, analysts astatine BofA spot net having fallen 10% successful 2022 and giving backmost different 4% this year. Per-share profit growth is seen arsenic rebounding astatine a patient clip successful 2024, though. The Bloomberg statement forecast is not rather arsenic upbeat arsenic what BofA sees. With precocious operating and GAAP net multiples, you mightiness opportunity nan banal is pricey. But let's return a look astatine ETSY's humanities price-to-sales ratio. Seeking Alpha shows a five-year mean aggregate of 10 and a existent trailing P/S of 7.3, shares whitethorn beryllium decently priced. The guardant PEG ratio is 2.5 compared pinch a 2.66 5-year mean, truthful that is astir reasonably valued. Overall, nan valuation looks astir adjacent here.

Etsy: Earnings, Valuation, Free Cash Flow Forecasts

Looking ahead, firm arena information provided by Wall Street Horizon show a confirmed Q4 2022 net day of Wednesday, Feb. 22 aft marketplace adjacent pinch a convention telephone instantly aft results deed nan tape. You tin listen unrecorded here.

Corporate Event Risk Calendar

The Options Angle

Digging into nan upcoming net report, information from Option Research & Technology Services (ORATS) show a statement EPS forecast of $0.82 compared to $1.11 of per-share profits earned successful nan aforesaid play a twelvemonth ago. Aside from past quarter's steep miss owed to nan impairment charge, nan institution has topped expert estimates successful each cases since August 2020. That's a bullish inclination for investors, but nan banal value guidance history is much mixed pinch nan banal wavering betwixt -15% and +15%.

Considering that nan at-the-money straddle utilizing nan options expiring soonest aft nan earning day is priced astatine conscionable 9% per ORATS data, that looks inexpensive to me. Being agelong premium up of nan net people looks for illustration a decent risk/reward play.

ETSY: Cheap Options Ahead of Earnings

The Technical Take

With a adjacent valuation and inexpensive options up of earnings, I spot immoderate bearish risks connected nan chart. Notice successful nan chart beneath that ETSY has guidance adjacent $150 - not acold from nan existent banal price. What's more, I spot a bearish ascending wedge pattern. A move supra $150 would nary uncertainty beryllium bullish and lead to an upside target adjacent $220, but I spot risks skewed to nan downside. And that statement is augmented by antagonistic RSI divergence and declining measurement connected nan caller tally up. Buying connected a autumn to nan level 200-day moving mean would spell on pinch buying connected worth too.

ETSY: Bearish Ascending Wedge

The Bottom Line

ETSY's valuation up of net seems adjacent while nan floor plan is bearish. If nan profit outlook is boosted adjacent week and nan banal rallies supra $150, a bullish maturation lawsuit could beryllium made. For now, buying connected a dip pinch a due separator of valuation information is nan prudent play.

This article was written by

Mike Zaccardi, CFA, CMT floor plan picture

Freelance Financial Writer astatine SoFi & Ally | Investments | Markets | Personal Finance | RetirementI create written contented utilized successful various formats including blogs, emails, achromatic papers, and societal media for financial advisors and finance firms successful a cost-efficient way. My passion is putting a communicative to financial data. Working pinch teams that see elder editors, finance strategists, trading managers, information analysts, and executives, I lend ideas to thief make contented relevant, accessible, and measurable. Having expertise successful thematic investing, marketplace events, customer education, and compelling finance outlooks, I subordinate to mundane investors successful a pithy way. I bask analyzing banal marketplace sectors, ETFs, economical data, and wide marketplace conditions, past producing snackable contented for various audiences. Macro drivers of plus classes specified arsenic stocks, bonds, commodities, currencies, and crypto excite me. I genuinely bask communicating finance pinch an acquisition and imaginative style. I besides judge successful producing evidence-based narratives utilizing empirical information to thrust location points. Charts are 1 of nan galore devices I leverage to show a communicative successful a elemental but engaging way. I attraction connected SEO and circumstantial style guides erstwhile appropriate. My CFA and CMT backgrounds show prowess successful finance guidance and my master acquisition includes extended nationalist speaking and communication. Moreover, my extended assemblage school and master trading acquisition supply useful skills. Past roles besides see dense usage of Excel modeling and floor plan creation arsenic good arsenic PowerPoint.I americium a contributor to The Dividend Freedom Tribe.

Disclosure: I/we person nary stock, action aliases akin derivative position successful immoderate of nan companies mentioned, and nary plans to initiate immoderate specified positions wrong nan adjacent 72 hours. I wrote this article myself, and it expresses my ain opinions. I americium not receiving compensation for it (other than from Seeking Alpha). I person nary business narration pinch immoderate institution whose banal is mentioned successful this article.