![]() ![]() It is a significant margin contraction, but I would like to highlight that it was not because of the increasing portion of SG&A to revenue. ![]() But the operating profit has been declining for a few quarters in a row, so I need to dig deeper here.Īs we can see, the operating margin shrunk substantially from about 15% last year and became much closer to 10% in Q1 of FY 2023. The gross profit growth was slightly lower than the revenue growth, which is ok for me. On the other hand, we see that cost of revenue and operating expenses grew faster than the topline during the last quarter. Narrowing down to quarterly financial performance, we can see that revenue growth momentum is still solid, with consistent double-digit YoY growth over several quarters, except for Q1 FY 2022. Therefore, I am optimistic about the management's allocation of revenues because it will enable the company to continue differentiating itself, which was the key to the past decade's growth. An e-commerce company must innovate to remain competitive in the business. It is good for investors, meaning the company is investing in improving users' experience and introducing new features to the marketplace. At the same time, the company's revenue reinvested into R&D has been very stable at about 17%. The company demonstrated a steady decline in the SG&A to revenue ratio, which means we can expect a further positive effect from economies of scale. This indicates that the company's execution was excellent during the pandemic. Though, the FCF softened significantly from pandemic highs. ![]() The company has a solid free cash flow margin with stock-based compensation deducted. As a potential investor, it is also crucial that profitability significantly improves as the business grows. represented over half of total FY 2022 sales.Įtsy delivered a staggering 35% revenue CAGR over the past decade. The company disaggregates its revenue by country the U.S. ETSY has determined it has four operating segments, Etsy, Reverb, Depop, and Elo7, which qualify for aggregation as one reportable segment. The company's fiscal year ends on December 31. According to the latest 10-K report, the company's Etsy, Reverb, Depop, and Elo7 marketplaces collectively joined 7.5 million active sellers to 95.1 million active buyers as of December 31, 2022. ![]() Etsy operates two-sided online marketplaces connecting millions of creative buyers and sellers worldwide. The company went public in 2015 and became a member of the S&P500 index in 2020. Company informationĮtsy is a global marketplace for creative goods, founded in 2005. Moreover, my valuation analysis suggests the upside potential for ETSY stock is massive. But I believe it is temporary and not secular. During the last quarter, ETSY increased its investment in R&D, which added pressure to the operating margin. The management has a strong track record of success and innovation. My analysis suggests the selloff was an overreaction to the company's slowing revenue growth and shrinking margins. ETSY experienced a selloff even year-to-date, while many other e-growth stocks rallied substantially. But, currently, the stock price is much lower than all-time highs. The stock demonstrated a massive rally in 2020-2021. Etsy ( NASDAQ: ETSY) has been one of the main beneficiaries during the pandemic. ![]()
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