Etsy Inc. (ETSY) - Get Report shares fell sharply lower Thursday after the online marketplace group posted a narrow first quarter revenue miss that included modestly improved 2019 profit guidance and plans for international expansion.
Etsy said diluted earnings for the three months ending in March came in at 24 cents per share, up more than twice the level of last year and bang in-line with the Street consensus forecast. Group sales, however, missed analysts' forecasts of $1.7 billion, even as they rose 40% to $169.339 million, pressuring shares in pre-market trading. Gross merchandise sales on the platform, the company said, rose 18.9% and passed the $1 billion mark for the first time.
Looking into 2019, Etsy sees year-on-year revenue growth between 30% and 32% with an adjusted operating margin of between 23% and 25%, a figure that was unchanged from its prior forecasts in February. Gross merchandise sales are expected to rise between 18% and 21%, the company said, as it expands in non-U.S. markets.
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"We're really encouraged by what we're seeing in the UK and now Germany as well, where both of those markets are now more than 50% domestic trade. So buyers buying in the UK, more than 50% of their purchases come from sellers in the UK," CEO Josh Silverman told investors on a conference call late Wednesday. "And we think that's a really encouraging sign. We'd love to see that repeated in France, and Australia and Canada and we're growing our presence in India. Although India, I want to point out we're really focused on in export strategy in India. Those are the core markets we're focused on."
"And I want to be careful about not spreading ourselves too thin with our investment dollars, particularly around the buy side, around things like performance marketing to drive buying activity," he added.
Etsy shares were down narly 11% on Thursday to $60.64.
"We expect increased marketing investment through the year along with continued testing of newer channels to optimize spend, both of which should support ongoing robust growth," said Canaccord Genuity analyst Maria Ripps. "While the stock's premium valuation could lead to short-term volatility in quarters like this with in-line revenue, we see abundant evidence of a business model continuing to evolve in a positive direction and expect continued robust growth and improving profitability going forward."