As I mentioned during last week’s State of the Markets, things are looking grim but don’t sell yet.
Now’s an opportunity to grab up great companies that are on sale. And today, I’m giving you the details on some of my favorites.
First up is Etsy Inc. (ETSY).
After the close on Thursday, the New York-based online marketplace reported its fourth-quarter (Q4/2021) results that easily beat estimates, driving shares up as much as 15.60% in early Friday trading.
But that’s not the only reason I like it. Nor is it the reason buyers love it. Etsy fills a niche that most online retailers don’t. Instead of selling the same mass-produced items that Amazon carries (which so many online retailers are trying to do), Etsy focuses on unique, one-off items that are often hand-made by the seller themselves. That means, in many cases, Etsy is the only place where these unique items, from jewelry to oil paintings, can be purchased for a premium.
And growing interest in these items, and the willingness to buy them, was reflected in the report. Gross merchandise sales per active seller hit an all-time high of $136, up 16% over the same period a year ago. Additionally, more than half of Etsy’s 2020 active buyers and 37% of 2020 new buyers came back to make a purchase in 2021.
For the quarter, the company reported record gross merchandise sales of $4.2 billion, up 16.5% from the same quarter last year.
Revenue came in at a record $717.14 million, which represented a year-over-year increase of 16%, and handily beat analyst expectations of $685.47 million.
Adjusted earnings for the quarter came in at $1.11 per share, well above estimates of $0.79 per share.
The company’s Q4 earnings looked great, but I don’t want to chase a stock that jumped more than 15% in early Friday trading, especially with the escalating conflict between Russia and Ukraine.
If shares of ETSY trade down to $132.00 by Friday, March 4, let’s buy the ETSY April 14, 2022 $140/$145 Call Spread for $2.00 or less. Plan on exiting the ETSY April 14, 2022 $140/$145 Call Spread for a 100% profit, or if shares of ETSY close below $108.00.
Then there’s Block, Inc. (SQ), the parent company of Square, the point-of-sale payment provider.
Shares of SQ jumped more than 20% in early Friday trading after the company reported Q4/2021 net revenue and gross payment volume that topped analyst estimates.
Net revenue jumped 62% to $4.42 billion, easily beating estimates of $4.04 billion.
That’s good.
Adjusted revenue rose 54% to $1.4 billion, topping estimates of $1.34 billion.
That’s also good.
Earnings for the quarter came in at $0.27 per adjusted share, down 15% from $0.32 in the same period a year ago, but still above analyst estimates of $0.23 per share.
And that’s good, too.
But here’s what’s caught my attention.
Before Thursday’s Q4/2021 results, the company had beat estimates three out of the last four quarters, but the stock has still fallen 56.83% since last Wednesday.
I think we could see the same pattern (trading lower after beating estimates) play out here after the initial excitement surrounding the recent results subsides.
If shares of SQ trade up to $127.00 by March 11, let’s buy the SQ May 20, 2022 $105/$100 Put Spread for $1.85 or less. Plan on exiting the SQ May 20, 2022 $105/$100 Put Spread for a 100% profit or if shares of SQ close above $140.50.
Cheers,
— Shah
Source: Total Wealth