Etsy tumbles 15% despite beating estimates
Etsy (ETSY) delivered quarterly results that topped analysts' expectations on Tuesday, but the stock plunged as the e-commerce company warned that foreign exchange rates could negatively impact third-quarter sales growth.
The shares sank as much as 15 percent in after-hours trading.
In its second report since going public, Etsy posted a second-quarter loss of 7 cents per share. Revenue came in at $61.37 million, up 44 percent from $42.51 million a year earlier.
Wall Street forecast Etsy would post a quarterly shortfall of 8 cents a share on $60 million in revenue.
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The online marketplace operator said currency rates, at their current levels, will continue to negatively affect gross merchandise sales growth for goods that are not listed in U.S. dollars. Etsy also said the rates could dampen the demand for dollar-denominated goods from buyers outside the U.S.
Operating expenses for the quarter increased to $43.25 million, up from $28.96 million in the year-earlier period. Etsy said it plans to spend more on marketing in absolute dollars in the third quarter compared with both the second quarter of 2015 and the third quarter of 2014.
Gil Luria of Wedbush Securities, which has an "underperform" rating and a $9 price target on Etsy shares, said the company's approach to spending isn't sustainable.
"They are increasing expenses at a much higher rate than their revenue growth and that's not sustainable and pretty soon their revenue growth is going to decelerate and they won't be able to justify what is now a 70 times EBITDA multiple," Luria said in an interview with CNBC's " Closing Bell " on Tuesday.
"All their growth isn't really sustainable. They are buying it basically by buying Google AdWords, they're buying it by introducing supply that shouldn't really be on Etsy in the first place."
Segment performance breakdown
Revenue generated from the company's marketplace-its cash cow-rose 23 percent year over year to $30.47 million, shy of StreetAccount's estimates for $31.3 million.
Seller services revenue climbed about 80 percent to $29.77 million, which outpaced estimates for $27 million.
Gross merchandise sales for the second quarter totaled $546.12 million, topping StreetAccount's projections of $545 million.
Etsy announced in its previous results report that international sales during the second quarter could be impacted by a stronger dollar. The company also projected it would increase the pace of hiring and noted expenses, such as $300,000 for its IPO, would not recur in the period.
Etsy went public in mid-April. Its stock has fallen more than 30 percent below the all-time high of $30 it hit on its first day of trading.
Etsy was founded in 2005 and is headquartered in Brooklyn, New York. The company provides a marketplace where people around the world connect to sell and buy unique goods.
-CNBC's Zack Guzman contributed to this report.
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