Preview: What to expect from Etsy Q1 earnings results?

Etsy (NASDAQ: ETSY) is scheduled to report its earnings results for the first quarter of 2019 on Wednesday after the market closes. The results will be benefited by an increase in gross merchandise sales, as well as growth in both Marketplace and Services revenue.

The bottom line could be hurt by digital marketing spend focused on driving gross merchandise sales growth and additional expenses related to employee departures, including stock-based compensation expense, impacting product development.

As the digital craft marketplace firm heads to the earnings announcement, the company is looking quite strong, thanks to the investment and initiatives taken to improve the platform’s user experience. Etsy has been consistent with topline growth of late and the growth has primarily been boosted by an increase in sales commission fees.

The gross merchandise sales are likely to be strong again driven by expanded seller base and a rising number of active buyers. It has been seen as a key metric and referred to the number of goods sold through the site.

Analysts expect the company’s earnings to jump by 40% to $0.14 per share and revenue to climb by 40.60% to $170.06 million for the first quarter. In comparison, during the previous year quarter, the company posted a profit of $0.10 per share on revenue of $120.91 million.

The company has surprised investors by exceeded analysts’ expectations in the three out of the past four quarters. Traders believed Etsy could report upbeat results for the first quarter. Majority of the analysts recommended a “hold” rating while expecting the stock to reach $74 per share in the next 52 weeks.

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For the fourth quarter, Etsy posted an 8% drop in earnings due to higher operating expenses. The growth in both Marketplace and Services revenue drove the top line higher by 47%. Gross merchandise sales increased by 22.3% year-over-year. The company delivered a strong holiday shopping period in the quarter with a 30% increase in gross merchandise sales from Thanksgiving through Cyber Monday.

For the full year 2019, the company had expected revenue to grow by 29% to 32% to the range of $779 million to $797 million and adjusted EBITDA margin to increase by 23% to 25% to the range of $181 million to $197 million. Gross merchandise sales were anticipated to rise by 17% to 20% to the range of $4.6 billion to $4.7 billion.

Shares of Etsy ended Monday’s regular session down 0.89% at $69.03 on the Nasdaq. The stock has risen over 125% in the past year and over 31% in the past three months.

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