Why Etsy’s Stock Is Down 66% This Year
Etsy’s (ETSY) stock has struggled this year so far, down more than 66% year-to-date.
The entire tech sector took a beating amid the broader bear market, but shares of Etsy were among the hardest hit. Snap (SNAP), Netflix (NFLX) and Shopify (SHOP) are among the other companies that have seen massive declines due to inflation, the war in Ukraine, rising gas prices and the rise in interest rates.
Shares of Etsy, where artisans can sell their wares online, have crashed more than 65% year-to-date on Monday, falling to around $72 before market close. This is the second biggest drop in the S&P 500 this year after Netflix.
“Etsy’s shares are falling due to the Fed’s expected rate hikes on higher-than-expected inflation. Its declines are largely in line with broader tech and e-commerce and are not idiosyncratic for Etsy,” said Citizen-owned JMP Securities analyst Nick Jones. .
The change in the company’s fortunes is brutal. Etsy has been a winner of the pandemic, seeing its online sales soar as e-commerce exploded amid shelter-in-place orders.
In April 2020, handmade face masks flew off Etsy’s virtual shelves. Etsy’s CEO said at the time that even maskless sales increased 79% that month, CNBC reported. The Brooklyn, NY-based platform’s stock simultaneously soared, reaching its all-time high of $296.91 in November 2021.
However, the pandemic e-commerce boom has since slowed, a situation made worse by inflation and related consumer spending concerns that have rattled both retail and technology. In February, Etsy reported a beat in earnings that was tempered by lower expectations for the first quarter. The company’s sales have slowed in recent quarters.
A year ago, the company’s shares were at $170.30, but have fallen more than 55% in the past 12 months.
The good news
Etsy’s future isn’t necessarily bleak. Jones is fundamentally optimistic about Etsy because he believes there is significant avenue for the company to “continue to attract new active shoppers globally given the robust categories it serves.” These categories include jewelry, furniture, fashion, and beauty. It helps that the company’s platform “is known for its personalized and unique products, while competing platforms are often known for CPG [consumer packaged goods] and used products,” Jones said.
Moreover, he is optimistic about how the brand is growing its customer base and services. To that end, Etsy — which has 95 million listings — recently announced Etsy Purchase Protection, which will invest $25 million to cover refunds and missing or incorrect items for sellers.
“This year, Etsy began to focus on shoppers who identify as male — historically, women have been Etsy’s target demographic,” Jones said. “We believe the company continues to focus on generating the most relevant results for its users through technology enhancements; which, if successful, will improve conversion and attract more active and repeat buyers.”
Allie Garfinkle is a senior technical reporter at Yahoo Finance. Find her on twitter @agarfinks.
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