UPDATE: The Etsy earnings report was released after the bell today. The company met top-line expectations but fell short on the bottom line.
The online marketplace reported a loss of $0.06 per share on revenue of $65.7 million. Analysts projected a loss of $0.06 per share on revenue of $66.2 million.
Previous story follows…
Etsy earnings for Q3 2015 come out after the closing bell today (Tuesday). This is the company's third-ever earnings report, and investors expect the company to post its third straight loss.
Analysts expect Etsy Inc. (Nasdaq: ETSY) to lose $0.06 per share on revenue of $66.2 million. Despite the EPS loss, that estimate marks an improvement over the Q2 numbers. In the second quarter, Etsy lost $0.07 per share on revenue of $61.4 million.
But the worst Etsy earnings report came in Q1 2015. During the first three months of the year, Etsy stock lost $0.84 per share. That loss was 96.4% larger than analysts projected.
ETSY stock's performance has been equally uninspiring. When the Etsy IPO hit the market on April 16, shares soared 88% on their first day. Etsy has fallen 64.4% since and is now considered one of the worst IPOs of 2015.
Shares of the handmade goods marketplace have also been decimated by one of its biggest competitors - Amazon.com Inc. (Nasdaq: AMZN).
On Oct. 8, Amazon launched "Handmade," its own online marketplace for artisan goods. According to Forbes, about 80,000 items from 5,000 sellers in 60 different countries went live on Handmade on the first day alone.
Amazon has clearly developed an "Etsy killer" with Handmade. After all, Amazon's 278 million active accounts dwarf Etsy's 21 million users. That means the Etsy stock price could fall much lower if Handmade's early success continues.
At $10.69 a share, investors are wondering if ETSY's discounted price offers the perfect opportunity to buy in to a rebound after the Etsy earnings report...
There are two reasons why you should avoid Etsy stock after the Q3 earnings report. The first is the company's lack of profitability.
[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
Etsy's operating expenses have skyrocketed in the last couple years. They increased 81.4% in 2013 and 67.6% in 2014. Although the company is slowly reducing costs, the operating expenses of $43.2 million in the second quarter alone show the company is still a long way from turning a profit.
The second reason is Etsy's B Corp. certification. That's a certification awarded to companies that "use the power of business to solve social and environmental problems." B Corp. - the nonprofit that awards the certifications - gives them to companies meeting various social, environmental, and accountability standards.
But these values threaten Etsy's ability to turn a profit. Company management prioritizes shareholder and community well-being over the success of Etsy stock.
Etsy wants investors to embrace its mission to be both socially conscious and financially successful.
"It's like a beautiful test in a way to see if it's possible to have a mission beyond money," said Rett Wallace, CEO of Triton Research, to Bloomberg. "You see these situations all the time where even management is doing their best to take every penny off the table - regardless of what it does to the widows and orphans - you often see fund managers saying, 'You're not doing enough to make money.'"
Follow us on Twitter: @moneymorning.
Like us on Facebook: Money Morning.
How to Safely Profit from Any IPO: Investing in newly issued stocks can seem like an exciting way to earn huge profits. But with institutional investors and other Wall Street "VIPs" cheating the market for quick gains, the IPO process is a rigged game nowadays. That's why we've outlined the three best IPO investing rules to follow for any new stock. Check them out here...