Why Etsy, Inc. Stock Soared 106.3% in the First Half of 2018

Australian dollars in Sydney, Friday, Jan. 15, 2016. (AAP Image/Joel Carrett) NO ARCHIVING

What happened

Shares of Etsy, Inc. (NASDAQ: ETSY) climbed 106.3% in June, according to data from S&P Global Market Intelligence. Shares posted big gains on a strong quarterly report in February and the rollout of the company's new user toolkit in June.

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The company reported fourth-quarter earnings on Feb. 27, with sales and earnings for both coming in well ahead of the market's expectations. The stock's next big movement arrived in June, courtesy of new monetization strategies that stand to make the business significantly more profitable.

So what

Etsy's first-quarter report delivered earnings of $0.15 per share and sales of $136.3 million, coming in well ahead of the average analyst estimate's call for $0.08 in earnings per share and sales of $133 million. Beyond the solid top- and bottom-line performance, evidence that the company is posting user-engagement growth has brightened the business' long-term outlook. The company's share price continued to trend upward in the months leading up to its next earnings report, but it gave up some ground following the first-quarter results release on May 8.

Etsy shareholders didn't have to sweat the slight stock performance for too long, however. The company issued a press release on June 14, laying out investment and growth initiatives that the market rewarded by bidding up the share price and delivering the stock's most rapid valuation gains to date.

The announcement detailed a series of new, added-service offerings. Etsy Plus has recently been made available and offers users special customization options, promotional listings, and other features at a monthly $10 rate. In 2019, the company will launch Etsy Premium — which will include all the features of the standard and Plus packages as well as advanced management tools and specialized customer service tailored to larger businesses. Pricing for Premium has yet to be detailed. The company also announced that, starting on July 16, its sales commission fee will increase from 3.6% to 5%.


Now what

With improving engagement metrics, international expansion plans, and new monetization initiatives, Etsy's business looks to become substantially more profitable. 2018 has already seen the company record substantial profits for for the first time since going public.

The overall growth outlook for the e-commerce market gives Etsy a promising backdrop to work against, and the company's specialized position could help insulate it from the threat of larger competitors. Shares trade at roughly 8.7 times this year's expected sales and 63 times expected earnings.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends Etsy. The Motley Fool has a disclosure policy.

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