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Etsy reported worse than expected first-quarter earnings after the market Wednesday that beat on revenue but missed on earnings. $ETSY stock was hit in a volatile session over 12% from after market highs after they retracted guidance and gross margins fell.


Etsy has become a powerhouse of cottage industry with many of it's shareholders etsy business owners. This has seen it labelled as a cult stock by many.


Etsy Inc NASDAQ: ETSY Q1 2020 Earnings


ETSY Stock Price Volatility After Earnings Highlights 'Cult Stock' Trading Risk

The post earnings release price action of ETSY highlights the risk of a thin, cult like stock such as it. It was fans versus algos are pitted against one another. Straight after the release the stock jumped to $81, after closing up $5.24 at $78.24.From there as the report was disected the stock collapsed over $10 to $70.35 before settling at $74.76 at the time of writing.


ETSY Earnings Volatity

Etsy Inc NASDAQ: ETSY Reported Earnings After Close Wednesday

$0.12 Met $0.12 EPS Forecast And $197.95 Million Beat $193.5 Mil Revenue Forecast


Etsy reported Q1 net income of 12.5 million, hit by a foreign exchange losses of 9.3 million, or .08 cents a share. EPS of .10 cents a share missed the.18 cents a share estimate on revenue of $228.1 million, up 34.7% increase YoY( year over year).

The concern for investors is rising revenues but falling margins and profits in what some have called a 'captive market' for the comoany during the Covid-19 lockdown. To underscore the risk thereto the compoany retracted guidance.



Market Reaction: After hours 73.75 −4.49 (5.74%)


  • Gross profit of $145.6 million, a 24.6% increase YoY,
  • Gross margins fell  5% over the same period due to the company’s acquisition of the Reverb platform and continued spending in it’s proprietary ad platform “Etsy Ads”.
  • Total operating expenses of $120.3 million, up 41.4% YoY, representing 52.7% of quarter revenue.
  • Announced a one off $11-13 million dollar cost to be incurred in Q2


Etsy retracted  full year guidance,  and halted it'sshare buyback program. 

One time costs of $11-13 million dollar cost to be incurred in Q2   CEO of Etsy, Josh Silverman said. The cost is from Etsy extending their "seller support initiatives in April, including providing listing credits for mask sellers as well as listing and ad credits to some of our hardest hit sellers in categories like weddings and party supplies. We donated thousands of face masks to hospitals and have supported many of our small, contracted vendors by keeping them employed despite our own office closures. The combination of one time investments to support our sellers and communities totaled approximately $11–13 million, the majority of which will be incurred in the second quarter of 2020."

Source: Etsy

From The TradersCommunity Research Desk

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