Why Etsy Inc (NASDAQ: ETSY) stock is going gangbusters today

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Etsy Inc (NASDAQ: ETSY) stock surged over 33.6% on June 14th, 2018 (as of  12:19 PM GMT-4; Source: Google finance)

The group upgraded their 2018 financial guidance with GMS growth in the range of 16%-19% as compared to the earlier guidance of 16%-18% while Revenue rise will now be in the range of 32%-34% against May 2018 prior guidance of 22%-24%. The Adjusted EBITDA margin is expected to be in the range of 21%-23% on the back of planned reinvestment in improved seller tools and support, enhanced shipping experience, and increased marketing.

The group announced new subscription packages and enhanced tools to support global sellers at different stages of growth. The new, optional monthly plans started roll out next month. They also announced that it is revising its seller transaction fee, which would support a better investments in the growth and health of the marketplace. In 2019, Etsy would plan to roll out Etsy Premium, which would be geared towards larger, and a better creative businesses.

For the first quarter of 2018, they delivered the third sequential quarter of GMS acceleration driven by their new strategy. GMS rose 19.8% on a year-over-year basis, a 200 basis point acceleration as compared to Q4, marking the third consecutive quarter of accelerating growth. GMS growth would have been 17.6% adjusted for FX, a 110 basis point sequential acceleration in constant currency terms.

Revenue rose over 25% on a year-over-year basis while their adjusted EBITDA margins were over 22%. The cumulative effect of their recent product enhancements are improving the buying and selling experience in a noticeable way and creating a virtuous cycle that would help drive future growth.

Better experience would lead to a higher conversion rate for new and repeat buyers. Visitors are having a successful shopping experience, those transactions lead to a higher lifetime value, or LTV. During first quarter they made progress in each part of the portfolio with some clear wins. The group expects over $75 million of annualized GMS which would resolve from enhancements launched in the first quarter focused on these four initiatives.

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