Has Etsy Stock Finally Bottomed?

Global digital marketplace Etsy NASDAQ: ETSY stock has sold off dramatically worse than the benchmark indices in 2022. The popular e-commerce platform was a pandemic winner as the lockdowns introduced millions of new customers to platform. Despite supply chain and logistics disruptions, the Company had a record 2021, indicating that customers continue to use the platform as buyers or sellers during the reopening of economics. The Company’s focus is getting its 90 million active customers to purchase more frequently by driving repeat visits should propel market share growth in 2022. While its Q4 2021 earnings blew out estimates, its fiscal Q1 2022 top and bottom line guidance was lowered. This is providing opportunistic pullback levels for prudent investors looking to grab some exposure in shares of Etsy.

Fiscal Q4 2021 Earnings Release

On Feb. 24, 2022, Etsy released its fiscal fourth-quarter 2021 results for the quarter ending December 2022. The Company reported earnings-per-share (EPS) profit of $1.11 excluding non-recurring items versus consensus analyst estimates for a profit of $0.77, beating estimates by $0.34. Revenues rose 16.2% year-over-year (YoY) to $717.45 million versus $685.45 million consensus analyst estimates. Adjusted EBITDA margin was 31% versus prior guidance of 26%. GMS rose 16.5% YoY to $4.20 billion versus previous guidance of $3.90 to $4.10 billion. Etsy CEO Josh Silverman commented,  "During the holiday season, our sellers — most businesses of one and insulated from widespread supply shortages or complex fulfillment processes — brought the benefits of shopping small to scale. Shoppers continue to love their experiences with Etsy and are coming back for more."

Lowered Guidance

Etsy lowered its fiscal Q1 2022 revenues to come in between $565 million to $590 million versus $629.51 million. Adjusted EBITDA margin is expected around 26% and GMS of $3.2 billion and $3.4 billion. 

Conference Call Takeaways

CEO Silverman noted that while many sellers were struggling with supply chain disruption, the Company still managed record levels of GMS in Q4 2021. The pandemic introduced millions of first-time consumers to Etsy, who are still coming back for more even during the reopening. GME rose 29.6% YoY to $13.5 billion and up 158% on a two-year basis. He noted that 2021 was not as much of a return to normal and the Company grew market share. The gains are not transitory as the Company focused on bringing in new buyers and getting existing buyers to shop more often. Etsy reached a record high of 90 million active buyers as new buyers grew by 84% in 2021. He pointed out 53% of all active buyers in 2020 made at least a purchase in 2021. Approximately 37% of 2020’s new buyers made a purchase in 2021. As for frequency, 49% of active buyers made two or more purchases in 2021 and GMS was a record $136 per active buyer on a trailing 12-month basis. He explained that these metrics illustrate success in cross-functional efforts that help drive efficiency and reliability which will drive the Etsy platform as the go-to-e-commerce destination for consumers. The plan is to keep consumers revisiting and repurchasing throughout 2022. CEO Silverman touched upon search and discovery for the Etsy marketplace, “Leveraging XWalk, we’re continuing to narrow the semantic gap by relying less on listing taxonomy and more on buyer interests. At year-end, our XWalk engine was utilizing over 4 billion data points, a 50% increase from when we launched in the second quarter of last year. This means we can use 16x more real-time data to capture semantic, meaning across our inventory with XWalk than we could with our prior search capabilities. Putting a finer point on it, Etsy search is simply getting better.” CEO Silverman stated that the “big hairy audacious goal” was to make Etsy “the starting point of your e-commerce journey”. He sees a TAM of $2 trillion for the Etsy marketplace.

ETSY Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision near-term view of the price action landscape for ETSY stock. The weekly rifle chart formed an inverse pup breakdown after peaking at the $163.80 Fibonacci (fib) level. The weekly 5-period is falling at $135.48 with 15-period MA following down at $154.65. The weekly 200-period MA sits at $112.30. The weekly stochastic attempted a mini pup but has stalled under the 20-band which will result in either a mini pup through the 20-band or a cross back down from rejecting off the 20-band. The weekly market structure low (MSL) trigger sits at $121.37. The daily rifle chart is in a breakdown with the 5-period MA at $134.52 crossing back down through the 15-period MA at $135.64. The daily 50-period MA is falling at $140.68. The daily lower Bollinger Bands (BBs) sit at $113.80. Prudent investors can watch for opportunistic pullback levels at the $121.37 weekly MSL trigger, $115.89, $113.12 fib, $107.44, $102.49, $95.08 fib, and the $92.64 fib level. Upside trajectories range from the $154.88 fib up towards the $193.42 fib level.