Etsy (ETSY) To Report Q3 Earnings: What's In The Store?

Etsy, Inc. (NASDAQ:ETSY) is scheduled to report third-quarter 2018 results on Nov 6.

Notably, the company has surpassed the Zacks Consensus Estimate in three of the trailing four quarters, recording average positive surprise of 75.63%.

In the last reported quarter, Etsy reported earnings of 3 cents per share, missing the Zacks Consensus Estimate by 7 cents. Further, the figure also fell short of the year-ago quarter as well as previous quarter’s figure of 10 cents.

Revenues increased 30.2% year over year and 9.5% sequentially to $132.4 million. The figure also outpaced the Zacks Consensus Estimate of $127 million. Growing revenues from Marketplace and Services categories during the second quarter drove the top line.

For the third quarter, the Zacks Consensus Estimate for earnings and revenues is pegged at 7 cents per share and $150.3 million, respectively.

Coming to the price performance, shares of Etsy have returned 110.4% on a year-to-date basis against the industry’s decline of 20.1%.

Let’s see how things are shaping up for this quarter.

Factors at Play

The company’s continued focus toward proper execution of its key growth initiatives is likely to continue driving its top line. Further, Etsy’s strong efforts toward enhancing product offerings are major positives.

All these initiatives are aiding the company’s marketing services to perform well, consequently strengthening its relationship with the sellers.

The growing adoption of Etsy’s targeted offers that enable the sellers to create sales promotions of their products are aiding the sellers in expanding customer base and bolstering sales by targeting these promotions to the buyers who are interested in these particular products. This is based on the data on buyers’ shopping behavior and search pattern.

Further, the company is focused on personalization and curation to enhance search experience on its platform in a bid to improve search and discovery. Additionally, the inclusion of buyers’ location in the company’s machine learning algorithm helps in better categorization of search results. This is likely to continue aiding the company’s conversion rates.

Further, the company’s robust tools designed for sellers will continue to attract sellers to its platform. The modified Sell feature on Etsy app that helps the sellers to deliver better buyer experience remains a major positive.

Moreover, Etsy’s increasing strategic investments, seller shipping promotions, performance marketing budget and strengthening customer services are likely to drive its results in the to-be-reported quarter.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Etsy has a Zacks Rank #3 but an Earnings ESP of -21.57%, which makes the surprise prediction difficult.

Stocks That Warrant a Look

Here are few stocks worth considering as our model shows that it has the right combination of elements to deliver an earnings beat in the upcoming releases.

Match Group (NASDAQ:MTCH) has an Earnings ESP of +3.59% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Adobe Systems Incorporated (NASDAQ:ADBE) has an Earnings ESP of +0.19% and a Zacks Rank #2.

Five9 (NASDAQ:FIVN) has an Earnings ESP of +5.88% and a Zacks Rank #3.

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