Etsy (ETSY) has plenty of time to turn things around.
That may be why investors are regaining confidence in the start-up e-commerce producer of handmade and vintage products. The shares are up 6% Wednesday.
Shareholders are eager to see if any new developments in Etsy's marketing plans or ability to turn a profit will be revealed in an aftermarket conference with Goldman Sachs (GS), especially after eight consecutive quarters of losses.
But despite two years of negative income, Etsy has a healthy leverage profile, and the stock has likely been unreasonably slammed (down 75% since its initial public offering in April), Justin Weil, a managing partner with Kalex Advisors, said in a phone interview.
Etsy is in relatively healthy shape as it had only about $10 million in debt last September, against $287 million in cash reserves, giving it room to breathe and come through on its marketing and development plans, Weil said.
"It's a real company; it's valuable; and it's still growing nicely year over year," he said. "And once they pass a certain threshold, all of their fixed costs will have been absorbed."
The Brooklyn start-up echoed so much at a December industry conference, as CFO Kristina Salen said the 10-year-old company has deeper roots than some investors realize.
"We have nearly 1.5 million active sellers, about 23 million active buyers in the most recent quarter," she said. " In 2014, we had nearly $2 billion in transactions in our marketplace."
She went on to highlight newer initiatives such as Etsy Manufacturing, which has been under development for several years, and is expected to help manufacturers of handmade products network in order to expand their businesses.
"So we already have hundreds of manufacturers who are applying to our Etsy Manufacturing network and we're really excited to grow that over the next couple of years," she said.
Etsy is slated to report its fourth-quarter 2015 earnings on Feb. 23.