Etsy Stock Is Headed to Its Lowest Level in 4 Years. What Wall Street Thinks About Earnings. -- Barrons.com

By Angela Palumbo

Etsy stock was on pace to have its worst day since 2020 after the e-commerce retailer posted lower-than-expected gross merchandise sales for the first quarter.

GMS of $2.99 billion was below the FactSet consensus of $3.03 billion and lower than the $3.1 billion reported in the same period last year. The results have led to concerns among Wall Street analysts over what the current state of the consumer means for the company's top-line.

Shares of Etsy were down 14% to $60.09, on pace to their lowest close since April 15, 2020, and largest drop since May 5, 2022, according to Dow Jones Market Data. The stock, which has fallen 28% this year, was one of the worst performers in the S&P 500 on Thursday.

"Our baseline GMS levels continued to be pressured by macro factors specifically related to consumer discretionary product spending that made it harder than we expected to bend the curve, which was disappointing," Chief Financial Officer Rachel Glaser said on the earnings call after the market closed on Wednesday.

Most analysts have a Hold equivalent or higher rating on shares. Of the 34 surveyed by FactSet, 14 say the stock is a Buy, 15 say Hold, and five say Sell.

"The company is still in the early innings of various product and marketing initiatives to engage and retain the record-high number of buyers and sellers added to the platform in the last 24 months, which should improve visibility, awareness and mind-share among consumers, ultimately invigorating GMS growth and profitability," Needham analyst Anna Andreeva wrote. She lowered her price target on the stock to $75 from $95 but maintained her Buy rating.

Canaccord Genuity Capital Markets analyst Maria Ripps also lowered her price target to $105 from $125 while maintaining her Buy rating. She wrote in a note that "while recovery in discretionary spend is taking longer to materialize, we think the continued progress around strategic product and marketing initiatives should position the company for strong performance once the discretionary spend environment improves."

Not everyone on Wall Street is as optimistic. Jefferies analyst John Colantuoni rates the stock Underperform with a $50 price target. He wrote that "habitual declines in core GMS despite incremental marketing investments further questions the size of Etsy's TAM [total addressable market] and current 50% premium to eBay's multiple."

Etsy currently trades at 25.6 times forward earnings, while eBay trades at 10.2 times expected earnings over the next 12 months.

Write to Angela Palumbo at angela.palumbo@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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May 02, 2024 11:56 ET (15:56 GMT)

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