Why Etsy, Inc. Stock Is Trading Lower

What happened

Shares or Etsy (NASDAQ: ETSY) fell as much as 17% on Wednesday following the company's fourth-quarter earnings release. At the time of this writing, shares of the online marketplace for creative goods are down about 14%.

So what

While Etsy's revenue of $110.2 million, up 25.4% year over year, was both higher than management's own guidance and higher than a consensus analyst estimate for revenue of $107.8 million, Etsy missed expectations on two marks: earnings per share (EPS) and revenue guidance.

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Etsy's fourth-quarter loss widened to $0.19 per share, down from a loss of $0.04 per share in the year-ago quarter. Analysts, on average, were expecting Etsy to report a profit of $0.02 per share for the quarter.

The wider loss was driven by rapid year-over-year growth in the company's operating expenses, which increased to represent 63.3% of revenue, up from 56.1% of revenue in the year-ago quarter. Management said the increase was primarily due to "an increase in employee-related expenses related to our acquisition of Blackbird Technologies and marketing expenses related to our brand campaign."

Looking forward, Etsy guided for year-over-year revenue growth in the range of 20% to 22% in 2017. On average, analysts expected 2017 revenue to increase 23%.

Now what

Etsy management is optimistic about the company's potential in 2017 and beyond. Etsy CEO Chad Dickerson asserted that the company's recent unveiling of Etsy Studio, a new global craft-supplies market, and an improved seller dashboard will "create new long-term growth opportunities for Etsy."

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Daniel Sparks has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Etsy. The Motley Fool has a disclosure policy.