What Happened?
Shares of online marketplace Etsy (NASDAQ:ETSY) fell 10.3% in the afternoon session after the company reported underwhelming fourth-quarter 2024 results, which revealed concerning weaknesses as its number of active buyers and revenue fell short of Wall Street's estimates. Specifically, its active buyers declined 2.6% while habitual buyers, those making frequent purchases, fell 9.5%. Its gross merchandise sales also dropped significantly. These factors reflect softer consumer spending and a competitive retail environment. On the bright side, it was encouraging to see Etsy beat analysts' EPS and EBITDA expectations this quarter, but this was still a disappointing quarter.
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What The Market Is Telling Us
Etsy’s shares are somewhat volatile and have had 13 moves greater than 5% over the last year. But moves this big are rare even for Etsy and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 10 months ago when the stock dropped 17.3% on the news that the company reported first quarter results. Its revenue growth regrettably slowed as its gross merchandise sales and active buyers fell short of analysts' estimates. That was slightly offset by the company's better-than-expected take rate, showing it charged higher commissions to offset its worse-than-expected demand. Etsy's management team noted that Q1 was a challenging environment for consumer discretionary products, which was a headwind to its growth. The company provided ambiguous guidance for the full year as well, spooking investors. Overall, this was a tough quarter for Etsy.
Etsy is down 0.5% since the beginning of the year, and at $52.84 per share, it is trading 31.5% below its 52-week high of $77.13 from February 2024. Investors who bought $1,000 worth of Etsy’s shares 5 years ago would now be looking at an investment worth $993.61.
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