Online marketplace Etsy (NASDAQ:ETSY) missed Wall Street’s revenue expectations in Q4 CY2024 as sales only rose 1.2% year on year to $852.2 million. Its GAAP profit of $1.03 per share was 9.7% above analysts’ consensus estimates.
Is now the time to buy Etsy? Find out by accessing our full research report, it’s free.
Etsy (ETSY) Q4 CY2024 Highlights:
- Revenue: $852.2 million vs analyst estimates of $862.9 million (1.2% year-on-year growth, 1.2% miss)
- EPS (GAAP): $1.03 vs analyst estimates of $0.94 (9.7% beat)
- Adjusted EBITDA: $250.6 million vs analyst estimates of $245.8 million (29.4% margin, 2% beat)
- Operating Margin: 18.2%, up from 13.7% in the same quarter last year
- Free Cash Flow Margin: 39.2%, up from 30.9% in the previous quarter
- Active Buyers: 95.46 million, down 1.02 million year on year
- Market Capitalization: $5.94 billion
"Despite facing significant GMS headwinds in 2024, we are proud to have delivered year-over-year revenue growth and very strong profitability, while simultaneously investing in our future," said Josh Silverman, CEO.
Company Overview
Founded by a struggling amateur furniture maker Robert Kalin and his two friends, Etsy (NASDAQ:ETSY) is one of the world’s largest online marketplaces, focusing on handmade or vintage items.
Online Marketplace
Marketplaces have existed for centuries. Where once it was a main street in a small town or a mall in the suburbs, sellers benefitted from proximity to one another because they could draw customers by offering convenience and selection. Today, a myriad of online marketplaces fulfill that same role, aggregating large customer bases, which attracts commission-paying sellers, generating flywheel scale effects that feed back into further customer acquisition.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, Etsy’s 6.4% annualized revenue growth over the last three years was tepid. This was below our standard for the consumer internet sector and is a tough starting point for our analysis.
This quarter, Etsy’s revenue grew by 1.2% year on year to $852.2 million, falling short of Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 2.8% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and implies its products and services will face some demand challenges.
Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) stock benefiting from the rise of AI. Click here to access our free report one of our favorites growth stories.
Active Buyers
Buyer Growth
As an online marketplace, Etsy generates revenue growth by increasing both the number of users on its platform and the average order size in dollars.
Etsy struggled to engage its audience over the last two years as its active buyers were flat at 95.46 million. This performance isn't ideal because internet usage is secular, meaning there are typically unaddressed market opportunities. If Etsy wants to accelerate growth, it likely needs to enhance the appeal of its current offerings or innovate with new products. 
In Q4, Etsy’s active buyers decreased by 1.02 million, a 1.1% drop since last year. The quarterly print was lower than its two-year result, suggesting its new initiatives aren’t moving the needle for buyers yet.
Revenue Per Buyer
Average revenue per buyer (ARPB) is a critical metric to track for online marketplace businesses like Etsy because it measures how much the company earns in transaction fees from each buyer. ARPB also gives us unique insights into a user’s average order size and Etsy’s take rate, or "cut", on each order.
Etsy’s ARPB growth has been mediocre over the last two years, averaging 3.9%. This raises questions about its platform’s health when paired with its flat active buyers. If Etsy wants to grow its buyers, it must either develop new features or lower its monetization of existing ones. 
This quarter, Etsy’s ARPB clocked in at $8.93. It grew by 2.3% year on year, faster than its active buyers.
Key Takeaways from Etsy’s Q4 Results
It was encouraging to see Etsy beat analysts’ EPS and EBITDA expectations this quarter. On the other hand, its number of active buyers and revenue fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 6% to $53.90 immediately after reporting.
Etsy’s latest earnings report disappointed. One quarter doesn’t define a company’s quality, so let’s explore whether the stock is a buy at the current price. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
