3 actions to avoid after posting disappointing earnings reports
August 9, 2021
6 minutes to read
This story originally appeared on StockNews
Despite investor concerns about the rapid spread of the COVID-19 Delta variant, major stock market indices are hovering around all-time highs, mainly due to impressive corporate earnings. But Etsy (ETSY), Fiverr (FVRR) and Fastly (FSLY) posted disappointing second quarter results last week. So we think it’s best to avoid these stocks now. Read on.
Even though more people are getting vaccinated, the rapid spread of the highly contagious variant of COVID-19 Delta worries investors. As a result, several countries are reimposing restrictions to curb the spread of the virus. For example, China imposed strict restrictions on international travel on August 4 after reporting its highest daily number of COVID-19 infections in recent months. Additionally, the US CDC revised its mask forecast last month.
Nonetheless, major stock market indices are hovering around historic highs thanks to strong corporate earnings. According to a Factset report, more companies in the S&P 500 exceeded second-quarter EPS estimates compared to the historical average, and they also exceeded EPS estimates by a larger than average margin.
However, not all companies have reported impressive results. Etsy, Inc. (ETSY), Fiverr International Ltd. (FVRR) and Fastly, Inc. (FSLY) posted disappointing second quarter results last week, and their shares fell as a result. So we think it’s best to avoid these three actions now.
Etsy, Inc. (ETSY)
With its motto “Keep Commerce Human”, ETSY in Brooklyn, NY operates two-sided online marketplaces that connect buyers and sellers, primarily in the US, UK, France and India. Its online marketplaces include Etsy.com and Reverb.com.
The company completed the acquisition of Depop on July 13. Depop is a community driven, goal driven marketplace for buying and selling unique clothing. However, the acquisition could impact ETSY’s already weak finances.
ETSY’s GMS fell 3.2% sequentially to $ 3.04 billion for the second quarter ended June 30, 2021. Company revenue declined 3.9% sequentially to reach $ 528.90 million. Its net income was $ 98.25 million, down 31.7% sequentially, while its EPS fell 9.3% year-on-year to $ 0.68. Its non-GAAP EBITDA decreased 7.4% year-over-year to $ 139.47 million.
For the current quarter ending September 30, 2021, ETSY’s revenue is expected to increase 14.7% year-over-year to $ 517.73 million. However, its EPS is expected to decline 26.4% year-on-year to $ 0.68 in the current quarter. The stock has lost 22.8% in the past six months and 5.5% since the release of its second quarter results on August 4, to close Friday’s trading session at $ 178.36.
ETSY’s POWR ratings are consistent with this grim outlook. The stock has an overall D rating, which results in a sale in our proprietary rating system. POWR scores are calculated by considering 118 separate factors, each factor being weighted to an optimal degree.
ETSY has a D rating for growth, value, stability and sentiment. Of the 74 stocks in the Internet industry ranked F, it is ranked No.52. In addition to the POWR Ratings we just highlighted, you can see the ETSY ratings for Momentum and Quality here.
Fiverr International Ltd. (FVRR)
Based in Tel Aviv, Israel, FVRR is an online marketplace worldwide. The company’s platform connects businesses of all sizes with qualified freelancers offering digital services in more than 500 categories across nine verticals, including graphic design, digital marketing, programming, video and animation.
On August 4, FVRR and Wix.com Ltd. (WIX) have partnered to deliver a unique program where WIX experts will train people with disabilities to create accessible websites. However, this partnership will take a heavy toll on the company’s expenses, although it will make the web more accessible to a larger consumer base.
For the second quarter ended June 30, 2021, FVRR revenue increased 10.2% sequentially to $ 75.26 million. However, the company’s operating loss for the quarter increased 1,295.3% year-over-year to $ 8.34 million. Its net loss amounted to $ 13.30 million compared to $ 124,000 during the period of the previous year. Its total liabilities for the quarter were $ 549.87 million, compared to $ 515.80 million for the quarter ended December 31, 2020.
FVRR’s revenue is expected to grow 30.2% year-on-year to $ 72.78 million for the quarter ending Dec.31, 2021. However, its EPS is expected to decline 92.1% year-on-year to 0. $ 01 in the same quarter. The stock fell 30.3% over the past month to close Friday’s trading session at $ 168.52. In addition, it is down 27.2% since the release of its second quarter results on August 5.
FVRR’s poor outlook is also apparent in its POWR ratings. The stock has an overall D rating, which equates to a sale in our proprietary rating system. FVRR also has a D rating for stability, value and quality.
FVRR is ranked # 69 in the Internet Industry. To see additional POWR ratings for Growth, Sentiment, and Momentum for FVRR, click here.
Fastly, Inc. (FSLY)
The real-time content delivery network (CDN) company FSLY provides streaming, security, media streaming, e-commerce, and private CDN services. In addition, the San Francisco-based company offers industry-leading security solutions, such as DDoS protection and unified API and web application protection solutions.
This month, many media outlets, including The New York Times, Financial Time, and online platforms, such as Twitch, Pinterest, and Reddit, have been affected by a service disruption caused by FSLY. A company spokesperson said, “We have identified a service configuration that has triggered disruption to our POPs around the world and have disabled that configuration. “
FSLY’s revenue increased 13.9% year-on-year to $ 85.03 million for the second quarter ended June 30, 2021. However, the company’s gross profit for the quarter was high. to $ 44.71 million, up from $ 44.97 million the previous year. Its operating loss increased 298% year-over-year to $ 57.47 million. Its net loss increased 303.1% year-on-year to $ 58.30 million, while its loss per share was $ 0.51, up 264.3% year-on-year.
Analysts expect FSLY’s revenue to grow 18.9% year-on-year to $ 345.78 million in its 2021 fiscal year. However, its EPS is expected to decline 361.6% year-on-year. for the quarter ending September 30, 2021. The stock has lost 27.5% over the past month and 9.4% since its last quarterly report on August 4, to close Friday’s trading session at 41.24 $.
It’s no surprise that FSLY has an overall F rating, which equates to a strong sale in our POWR rating system. Additionally, the stock has a D rating for growth, value, and stability, and an F rating for sentiment and quality. Click here to see FSLY’s rating for Momentum as well as in the Software – Applications sector.
Click here to view our Software Industry Report for 2021
ETSY shares were trading at $ 181.84 per share on Monday morning, up $ 3.48 (+ 95%). Since the start of the year, ETSY has gained 2.21%, compared to an 18.91% increase in the benchmark S&P 500 over the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in economics in college and has a passion for writing, which led to her career as a research analyst.
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