Preview: Investments and marketing costs could hurt Etsy’s Q4 earnings

Etsy (ETSY) has rewarded its investors well during the last year, with the stock soaring over 150% in the trailing 12 months. This compares with an industry decline of almost 20%. As the digital craft marketplace firm heads towards the fourth-quarter results, the company is looking quite strong, thanks to the investments and initiatives taken to improve the platform’s user experience.

Etsy is scheduled to report its next quarterly results on February 25, Monday, after the regular trading hours. Analysts expect the company to post earnings of 21 cents per share on revenues of $194.9 million.

The street expectation for revenue falls near the upper end of the projection range of $192 million to $196 million set by the management. The mid-point of this range suggests a 43% jump from the same period last year. Etsy has been consistent with topline growth of late – it grew 41% in Q3 and 30% in Q2.

The revenue growth has primarily been boosted by a hike in sales commission fees introduced by CEO Josh Silverman, who took charge in May 2017.

READ: Pinterest joins the tech IPO bandwagon

However, growth in revenue might not necessarily translate to the bottom line in Q4, as the company is currently raising its marketing spend as well as investments as part of its cloud integration. In the last reported quarter, Etsy had surprised Wall Street by reporting EPS of 15 cents versus 9 cents projected.

On the other hand, thanks to an expanded seller base and an increasing number of active buyers, gross merchandise sales (GMS) is expected to be strong once again during the holiday quarter. GMS refers to the number of goods sold through the site and is seen as a key metric for Etsy.

READ: Photronics posts mixed Q1 results

During the last reported quarter, Etsy had raised its outlook for full-year GMS to $3.87 billion to $3.9 billion, up 20% annually.

The New York-based firm is also conducting an investors’ day on March 7.

The stock has a 12-month average price target of $63, which is at a 17% upside from the last close. All four analysts covering the stock have given Buy ratings.

Get access to timely and accurate verbatim transcripts that are published within hours of the event