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Based in Brooklyn, New York, Etsy, Inc. (ETSY) is an e-commerce service provider that operates two-sided online marketplaces that connect buyers and sellers. Valued at a market cap of $6.7 billion, the company’s primary marketplace is Etsy.com, which allows various merchants to list and sell their unique and creative products belonging to a wide range of categories, including home furnishings, jewelry and personal accessories, craft supplies, among others.
Companies worth less than $10 billion are generally described as “mid-cap” stocks, and Etsy fits this criterion perfectly. Apart from Etsy.com, the company also offers Reverb, a musical instrument marketplace; Depop, a fashion resale marketplace; and Elo7, a Brazil-based marketplace for handmade and unique items. The company distinguishes itself by offering one-of-a-kind, personalized, and unique products that are not typically found in traditional retail stores.
Shares of ETSY are trading 37.2% below their 52-week high of $89.58, recorded in December last year. The e-commerce company has declined 4.6% over the past three months, lagging behind the broader ProShares Online Retail ETF’s (ONLN) 12.9% return over the same time frame.
In the longer term, ETSY stock is down 30.6% on a YTD basis, significantly lagging behind ONLN’s 27.2% gains. Moreover, shares of ETSY have dipped 12.9% over the past 52 weeks, compared to ONLN’s 48.4% returns over the same time frame.
To confirm its bearish trend, ETSY has been trading below its 200-day moving average since December last year and has remained below its 50-day moving average since January, despite some fluctuations.
ETSY’s underperformance can be attributed to an unfavorable macroeconomic environment, marked by a slowdown in consumer discretionary spending coupled with increasing competition in the industry from both large-scale marketplaces and niche platforms.
Moreover, shares of ETSY dropped 7.7% following its mixed Q2 earnings release on Jul. 31. The company’s revenue of $647.8 million in the period surpassed Wall Street estimates, but its earnings of $0.41 per share lagged behind the estimates. Its 2.1% decrease in consolidated gross merchandise sales (GMS) and a 3.2% drop in ETSY marketplace GMS further lowered investor confidence.
ETSY’s underperformance becomes more evident when compared to its rival, Revolve Group, Inc. (RVLV), which surged 84.1% over the past 52 weeks and 51.1% on a YTD basis.
As ETSY underperformed relative to its industry peers, analysts remain cautious about its prospects. The stock has a consensus rating of “Hold” from 27 analysts in coverage, and the mean price target of $67.09 suggests a 17.4% premium to its current levels.
On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
