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Etsy
the stock was in freefall on Wednesday night after the online craft retailer’s sales outlook overshadowed a strong second quarter earnings report.
Etsy (ticker: ETSY) reported second quarter earnings of 68 cents a share, beating Wall Street expectations for 63 cents. Sales amounted to $ 529 million, beating analysts’ forecast of $ 525 million. The company recorded $ 3 billion in consolidated gross merchandise sales, within management’s forecast of $ 2.8 billion to $ 3.1 billion.
In addition, active sellers increased 67% in the quarter and active buyers increased 50.1% compared to the same period last year. Gross merchandise sales per active buyer also increased 22% year-on-year.
Still, Etsy stock plunged 14.5% in after-hours trading to $ 172.85.
What is likely worrying investors is that Etsy’s guidance for the third quarter suggests the company may give way as the economy reopens. Management expects revenues of between $ 500 million and $ 525 million for the September quarter, below analysts’ estimates for revenue of $ 528 million for the period. Etsy has yet to provide guidance for the full year.
In addition, exceeding analysts’ expectations may no longer be enough for e-commerce companies to satisfy investors.
As for the results, analysts had high expectations of Etsy, projecting sales and earnings that were in the upper range of management’s expectations. As Etsy has surpassed analyst benchmarks and released figures in line with its own guidance, investors appear to be reassessing the growth potential of e-commerce, especially after the surge in online spending during the Covid-19 pandemic. It also remains to be seen whether the economic reopening will allow traditional retailers to recoup consumer spending that would otherwise have gone online.
Overall, shares of e-commerce companies were hit, despite better-than-expected earnings. Last week, last week, Amazon.com (AMZN) topped profit estimates, but sales were slightly lower than analysts’ forecasts for the e-commerce giant’s last quarter. This prompted investors to erase 7.4% of the company’s market cap in after-hours trading in the wake of the report.
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