Etsy Earnings: Revenue and Earnings Outperformance Don't Appease the Market; Shares Very Cheap

We believe wide-moat Etsy offers compelling value for investors despite a brutal 2023, which has seen its share price fall by a striking 45%. While we're sympathetic to the market's concerns regarding the craft marketplace's growth prospects and potential operating leverage, we continue to view its reaction as myopic. We continue to foresee a route to double-digit gross merchandise sales, or GMS, growth and the margin leverage that begets as soon as 2025. With the firm's $3.04 billion in GMS, $636 million in revenue, and $0.64 in diluted EPS all topping our quarterly estimates, we expect little change to our $145 intrinsic valuation despite worse-than-expected fourth-quarter guidance (low-single-digit GMS decline and a 2-percentage-point sequential fall in adjusted EBITDA margin at the midpoint).