Etsy Shares Tumble Despite Beating Estimates

Etsy shares were tumbling Tuesday evening, even after the online marketplace for handmade and vintage goods beat top and bottom line estimates in its second quarter.

Shares tumbled 13% to $16.65 in after-hours trading.

The Brooklyn, New York-based company said it lost $6.35 million, or seven cents per share, compared to $3.15 million, or eight cents per share, a year ago. This was a penny better than analysts expected.

While revenue continues to grow -- it jumped 44% to $61.4 million in the quarter, beating analyst estimates of $59.6 million -- the company hasn't turned a profit in several years.

Part of the reason is rising costs.  Total operating expenses increased 49% to $43.2 million in the quarter. Etsy said it is spending heavily on marketing, which is eating into its bottom line, and will continue to spend more on marketing "in absolute dollars" to order to grow its business. The company will also continue to ramp up hiring.

Etsy also blamed the strong dollar for weighing on demand for U.S. dollar-denominated goods. Etsy said that on a constant currency basis, gross merchandise sales would have risen 26.5%, instead of the 24.6% they actually rose. Etsy doesn't anticipate exchange rates ceasing to be a drag on sales anytime soon, either.

At the end of the quarter, Etsy had almost 1.5 million active sellers (up from 1.4 million in the previous quarter) and 21.7 million active buyers (up from 20.8 million).

Shares are down nearly 40% since the company's April IPO. On its first day of trading, it locked in an 87.5% gain to close at $30 per share.