Etsy stock is down more than 15% Thursday, as investors reacted to first quarter results that showed a decline in gross merchandise sales. Etsy Chief Executive Josh Silverman called the e-commerce company's results a "bit of a disappointment," which he pinned on "squeezed" consumer wallets.
In results published late Wednesday, Etsy said that it earned 48 cents per share on sales of $646 million for the March-ending quarter. Both those numbers were roughly in line with Wall Street's expectations, as tabulated by FactSet. Revenue increased just under 1%.
But the company's gross merchandise sales — the total value of all items sold within Etsy's marketplaces for the quarter — fell 3.7% to $2.99 billion. Analysts were expecting a more modest decline to $3.03 billion.
"Consumers' preference for lower-cost alternatives with limited discretionary spending power is leading to reduced spending and frequency on Etsy's core marketplace, a dynamic that we do not see changing any time soon," Wedbush analyst Seth Basham wrote to clients Thursday. "In addition, the competitive environment remains intense."
On the stock market today, Etsy stock fell more than 16% to 58.19 in recent action.
Etsy Stock Forecast
Etsy is not predicting a turnaround for the current quarter, either. Chief Financial Officer Rachel Glaser told analysts Wednesday that Etsy expects a similar year-over-year decline in gross merchandise sales for the second quarter.
Glaser said the company could see a modest acceleration in year-over-year gross merchandise sales in the second half of 2024, but that there are a range of potential outcomes.
"You know we like to call it like we see it, and it's just really tough for us to call it right now," Glaser told analysts.
Etsy Focuses On Gifting
Etsy's marketplace connects roughly 9 million independent sellers of mostly handcrafted items with about 91.6 million buyers as of March, up 1.6% from a year earlier. The company earns revenue from listing and transaction fees. It also sells advertising to sellers on the platform.
A big challenge for Etsy is that consumers have cut back on discretionary spending. Silverman has previously called out increased competition from Amazon and Walmart, as well as lower-cost e-commerce sellers out of China such as Temu and Shein.
"In spite of what we're seeing about a generally healthy economy, consumers feel really pressured," Silverman told analysts Wednesday. "So they are seeking value and deep discounts and deep promotions."
That has helped "Chinese competitors," Silverman added, but he added that Etsy is noticing "trip consolidation." A shopper making a trip to Walmart may also buy a gift for a friend while in the store — taking away a potential sale for Etsy.
"Our focus in that is not to chase them to the bottom, is not to try to be the very cheapest place to buy things," Silverman said. "It's to make Etsy more Etsy."
That meant it focused on highlighting unique items and potential gifts. Etsy has invested in tools it believes will make it the go-to source for gifting. That includes a new hub that offers AI- and human-curated recommendations.
Analysts Mixed On Etsy Stock
But analysts are mixed on when, or whether, those changes can turn around the company's slumping sales.
Wedbush's Basham maintained a neutral rating for the stock, citing a lack of a "catalyst" to help Etsy return to growth.
Jefferies analyst John Colantuoni reiterated a negative underperform rating following the report. He wrote Wednesday that "habitual declines in core GMS, despite incremental marketing investments, further questions the size of Etsy's total addressable market."
Evercore ISI analyst Jian Li kept a positive "outperform" rating for Etsy, but lowered the firm's price target to 80 from 90. Evercore expects Etsy to trade sideways in the near-term. But, "We think the risk/reward profile is starting to look interesting," Li wrote. "Hence, we are patiently sticking with our outperform rating."
Etsy Stock: Technical Ratings
With Etsy's slide Thursday, shares have lost 29% this year, compared to a 5.6% gain for the S&P 500. Further, Etsy stock is down 40% in the past 12 months, compared to a 20% gain for the S&P 500.
Coming into the report, Etsy stock had an IBD Composite Rating of 55 out of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
Further, Etsy's IBD Relative Strength Rating was a meager 21 out of 99.
