Etsy Looks Ripe for Optimism as Earnings Approach

ETSY will release Q3 earnings on Nov. 3

Oct 19, 2021 at 11:04 AM
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Etsy, Inc. (NASDAQ: ETSY) is an American e-commerce company. ETSY operates a two-sided online marketplace that connects buyers and sellers around the world. Etsy's business is primarily focused on handmade or vintage items and craft supplies. This afternoon, ETSY is down 0.5% at $226.94. 

On Oct.13, Etsy announced its plans to release its third-quarter results after the market closes on Wednesday, November 3. Etsy has beat Wall Street's earnings expectations on all four of its most recently released earnings reports and is expected to report earnings of $0.54 per share for Q3 of 2021.

For Q3 2020, Etsy stock outperformed analysts’ estimates by a margin of $0.10, reporting an EPS of $0.70. For Q4 of 2020, ETSY's EPS increased to $1.08, beating expectations by a margin of $0.49. For Q1 of 2021, Etsy had a decrease in earnings, dropping to $1.00 per share. However, the e-commerce company still beat estimates by a margin of $0.12. Most recently, for Q2 of 2021, ETSY reported an EPS of $0.68 and beat expectations by a margin of $0.05.

Etsy stock has increased about 53% in price year-over-year and has added 100% since its 52-week low of $113.49, which was reached last November. Additionally, shares of ETSY have grown 30% year-to-date, but the stock is currently off 10% from its early March all-time high of $251.86.

From a fundamental point of view, Etsy is perhaps amongst the most consistent and stable growth companies in the e-commerce space. ETSY has a manageable balance sheet, which includes $2.48 billion in cash and $2.32 billion in total debt.

Etsy stock currently trades at a high price-earnings ratio of 65.63, which isn’t uncommon. However, the biggest concern with ETSY lies is its valuation, now that the company’s revenue growth is beginning to slow down. Nonetheless, Etsy stock also has a forward price-earnings ratio of 52.36, which promises decent earnings growth despite some doubts on the top line.

An unwinding of pessimism in the options pit could put wind at ETSY's back. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock sports a 10-day put/call volume ratio of 1.45, which stands higher than 98% of readings from the last year, implying options traders are picking up puts at a quicker-than-usual pace. 

The stock's Schaeffer's put/call open interest ratio (SOIR) of 1.38 echoes this, and stands in the highest percentile of its annual range. This means short-term options traders have not been this put-biased over the past 12 months. 

Now looks like an excellent time to speculate on Etsy stock's next move with options. The equity's Schaeffer's Volatility Scorecard (SVS) sits at 82 out of a possible 100, meaning options traders have been pricing in relatively low volatility expectations for ETSY, and that the stock has tended to exceed these expectations.


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