Etsy posted a mixed fourth-quarter, as the e-commerce marketplace battles fierce competition and a market where consumers have cut back on nonessential spending. Etsy stock fell Thursday as investors digested quarterly results posted late Wednesday.
Brooklyn-based Etsy said it earned 62 cents per share on sales of $842 million for the December-ending quarter. The earnings missed Wall Street analyst projections of 77 cents per share but topped sales estimates of $828 million, according to a FactSet poll. For the same period a year earlier, Etsy earned 77 cents per share on sales of $828 million.
For the current quarter ending in March, Etsy guided for gross merchandise sales to decline "in the low-single-digit range" on a year-over-year basis. In a letter to investors, Etsy officials said its guidance for the March-ending period "reflects our slow start to the quarter."
On the stock market today, Etsy stock fell more than 8% to close at 70.62.
Etsy CEO: Amazon, Walmart, Temu, Shein Taking Share
Etsy's marketplace connects roughly 9 million independent sellers of mostly handcrafted items with more than 90 million buyers. The company earns revenue from listing and transaction fees, as well as by selling advertising to sellers, among other sources.
Helped by strong consumer spending, Etsy saw it sales and share value surge in the first two years of the pandemic. But it has struggled to follow up on that growth. Etsy stock lost 32% of its value last year after a 45% loss in 2022.
On a call with analysts Wednesday, Etsy Chief Executive Josh Silverman said that the e-commerce market is favoring a small group of companies.
"It's very clear that the people gaining share are Amazon, Walmart, Temu and Shein," Silverman said. "And almost everyone else is losing share."
Silverman said those companies have focused on discounting. They also sell — particularly for Amazon and Walmart — essential items that can make up for weakness in discretionary purchases. In November, Silverman told analysts that big-spending from Temu and Shein had raised the cost of online advertising.
Further, people with extra cash to spend are using it for experiences such as travel and dining, Silverman said Wednesday. That is creating headwinds for Etsy sales. For the December quarter, gross merchandise sales fell just under 1% year over year to $4 billion.
To win customers, Etsy is investing in a tool that it believes will make it the go-to source for gifting. That includes a new hub that offers AI- and human-curated recommendations.
Despite what the company described as a slow start to 2024, Etsy Chief Financial Officer Rachel Glaser told investors that it expects sales to improve. The first quarter is likely a "low point" for gross merchandise sales and overall revenue growth, according to the company's letter to investors.
Analysts Mixed On Etsy Stock
Following the report, Evercore ISI analyst Shweta Khajuria maintained a positive outperform rating, but lowered her price target to 90 from 95.
"While management will focus on areas in their control — product development and marketing — to deliver on top line and profit goals, the company continues to face macro and competitive headwinds," Khajuria wrote to clients. "We remain optimistic with a mid-to-long term view."
Meanwhile, BofA Securities analyst Curtis Nagle reiterated a neutral rating, lowering his price target for Etsy stock to 82, from 90. Nagle noted that Etsy guided for adjusted margins that were roughly the same as 2023 levels.
"Based on investor conversations, softer GMS trends were likely already priced in for Q1," Nagle wrote to clients. "However, investors were also likely anticipating more margin expansion for FY '24 than implied by the guide."
Etsy is attempting to balance new growth initiatives with cost-cutting. The company cut 11% of its workforce in December. Glaser told analysts that Etsy reduced its internal projections for operating costs in 2024 by $90 million. The company will reinvest that into growth initiatives, she added.
Technical Ratings For Etsy Stock
Prior to earnings, Etsy stock gained 1.6% in Wednesday trading. Shares are off 12% to start this year, including the decline Thursday.
Coming into the report, Etsy stock had an IBD Composite Rating of 64, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating of a stock's overall performance.
Further, Etsy's IBD Relative Strength Rating was 23 out of 99. The rating compares a stock's price movement over the last 52 weeks with that of others in IBD's database. The best stocks score 90 or higher.
But Etsy still has some institutional support. Shares have an Accumulation/Distribution Rating B-, which indicates more institutional buying than selling of shares.
Etsy stock has formed a consolidation pattern with a buy point of 89.58, according to MarketSmith. However, that was prior to the market reaction following Etsy's earnings report.
