Down More Than 40% From its All-Time High, is Now a Good Time to Scoop Up Etsy Stock?

NASDAQ: ETSY | Etsy Inc. News, Ratings, and Charts

ETSY – Etsy (ETSY) has been one of the top-performing e-commerce stocks amid the COVID-19 pandemic. The company also topped Wall Street’s estimates in its last reported quarter. However, the stock has been down more than 40% in price since it hit its record high in November 2021. An insider sale of $7.70 million worth of shares last month added to the bearish sentiments. So, will the stock regain its momentum anytime soon? Read on.

Based in Brooklyn, New York, Etsy, Inc. (ETSY) operates two-sided online marketplaces Etsy.com and Reverb.com that connect buyers and sellers primarily in the United States, the United Kingdom, Germany, Canada, Australia, France, and India. The company’s offering includes handmade and vintage items, art, and supplies, alongside regular clothing, housewares, and more.

ETSY’s business has thrived during the pandemic as stuck-at-home have shoppers turned to online retailers for essential and non-essential items. ETSY’s face mask sales boomed and contributed significantly to its gross merchandise sales. Furthermore, in its most recent quarter, the company topped Wall Street estimates of its top and bottom lines. However, the company delivered lower than expected revenue guidance for the fourth quarter, causing its shares to dip in price. In addition, retailers are still dealing with global supply chain woes. Although chief executive Josh Silverman claimed that the company is immune to the crisis, many of its sellers shared their worries about their businesses struggling to source required materials.

ETSY shares declined 43.8% in price after hitting their 52-week high of $307.75 on Nov.26, 2021. The stock has slumped 24.8% in price over the past month and 11.6% over the past five days to close its last trading session at $163.70. Furthermore, the stock is trading well below its 50-day and 200-day moving averages, indicating a downtrend. And last month, President & CEO Josh Silverman sold 32,500 shares of ETSY at an average price of $238.39 a share, totaling $7.70 million, adding to the bearish sentiments.

Here is what could shape ETSY’s performance in the near term:

Stretched Valuation

ETSY 53.43x forward P/E is 234.2% higher than the 15.99x industry average. In terms of forward EV/Sales, ETSY is currently trading at 9.69x, which is 612.9% higher than the 1.36x industry average. Also, its 9.04x forward Price/Sales is 667.4% higher than the 1.18x industry average.

Weak Bottom Line

ETSY’s revenues increased 17.9% year-over-year to $532.43 million in its fiscal third quarter, ended September 30, surpassing the consensus estimate by $13.29 million. However, its net income came in at $89.93 million, down 2% from the same period last year. The decline can be attributed to acquisition-related expenses and non-cash amortization for the acquisitions of Depop and Elo7. Its adjusted EBITDA margin declined 100 basis points from the same period prior year to 33%, and its EPS came in at $0.62, indicating an 11.4% decline from its prior-year quarter. However, it topped Street estimates by 14.8%. In addition, the company’s net cash provided by operating activities decreased 17% year-over-year to $361.09 million in the nine months ended September 30, while its cash and cash equivalents balance stood at $624.74 million, compared to its $1.15 billion year-ago value.

Bottom Line Expected to Worsen

Analysts expect a 10,8% year-over-year increase in the company’s revenue in the about to be reported quarter, ended December 31, 2021, 19.6% in the current quarter, and 33.1% in fiscal 2021. However, its EPS is expected to decline 29.6% in its last quarter and 16% in the current quarter. The Street expects a 13.8% year-over-year improvement in its EPS in fiscal 2021.

POWR Ratings Reflect This Bleak Prospects

ETSY has an overall D rating, which translates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a D grade for Stability, which is consistent with its 1.55 beta.

ETSY has an F grade for Value. Its stretched valuations justify this grade.

Of the 77 stocks in the F-rated Internet industry, ETSY is ranked #54.

Beyond what I have stated above, one can also view ETSY’s grades for Sentiment, Growth, Momentum, and Quality here.

View the top-rated stocks in the Internet industry here.

Bottom Line

ETSY has been one of the biggest beneficiaries of the pandemic-driven e-commerce wave. However, in its most recent quarter, the company had reported weak bottom-line growth. The company expects fourth-quarter revenue growth of about $660 million – $690 million, representing a 10% year-over-year growth at the midpoint, which is lower than Street’s expectation of 10.8% growth. Moreover, ETSY’s lofty valuation and high volatility could be a concern. Thus, we think it could be best to avoid the stock now.

How Does Etsy, Inc. (ETSY) Stack Up Against its Peers?

While ETSY has an overall POWR Rating of D, one might want to consider investing in Travelzoo (TZOO), which has an A (Strong Buy) rating, and Yelp Inc. (YELP) and Alphabet Inc. (GOOGL), which have a B(Buy) rating.

Click here to check out our E-commerce Industry Report


ETSY shares fell $3.70 (-2.26%) in premarket trading Tuesday. Year-to-date, ETSY has declined -25.23%, versus a -2.16% rise in the benchmark S&P 500 index during the same period.


About the Author: Subhasree Kar


Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
ETSYGet RatingGet RatingGet Rating
TZOOGet RatingGet RatingGet Rating
YELPGet RatingGet RatingGet Rating
GOOGLGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

Recession is Here...Watch Out Below!

More and more it looks like recession is here. This includes a dramatic decline for ISM Manufacturing discovered this morning. As you likely know, most economist call manufacturing the "canary in the coal mine" for the US economy as it often shows weakness before other areas. In fact, GDP Now from the Atlanta Fed reads it loud and clear with a negative revision for the US economy down to -2.1% for Q2. Ouch! We are going to discuss these new economic facts...what it means for the stock market outlook...and an interesting view on why the S&P 500 (SPY) does not decline in orderly fashion. All that and more is coming your way in this week's commentary…

:  |  News, Ratings, and Charts

4 Ideal Stocks to Add to Your Portfolio in July

While sluggish consumer spending data led to the stock market ending the last trading session of June in the red, a moderate inflation forecast is nurturing hopes over the economy to avoid a recession. Therefore, investors might consider buying quality stocks ARC Document Solutions (ARC), Core Molding Technologies (CMT), DLH Holdings (DLHC), and Friedman Industries (FRD) at their current low price levels to benefit from their big rebounds. Read more…

:  |  News, Ratings, and Charts

Stocks to Fall MUCH FURTHER this Bear Market Cycle

Spoiler alert...the bear market is not over. Unfortunately history shows that the S&P 500 (SPY) has much further to fall to squeeze out excess valuation. That is just a natural part of the bear market process that is properly explained in this timely market commentary. More importantly, this commentary provides a strategy on how to profit in the days and weeks ahead as the market finds its way to bottom. Read on below for more...

:  |  News, Ratings, and Charts

Wall Street Analysts Predict More Than 160% Upside in These Stocks

The high global inflation and hawkish federal reserve are leading to heightened volatility in the market. However, despite the market uncertainties, Wall Street analysts see a more than 160% upside potential in IonQ (IONQ) and Rigetti Computing (RGTI). Thus, these stocks could be ideal additions to your watchlist. Keep reading…

:  |  News, Ratings, and Charts

Stocks to Fall MUCH FURTHER this Bear Market Cycle

Spoiler alert...the bear market is not over. Unfortunately history shows that the S&P 500 (SPY) has much further to fall to squeeze out excess valuation. That is just a natural part of the bear market process that is properly explained in this timely market commentary. More importantly, this commentary provides a strategy on how to profit in the days and weeks ahead as the market finds its way to bottom. Read on below for more...

Read More Stories

More Etsy Inc. (ETSY) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All ETSY News