Etsy Faces Challenges as Earnings and Sales Decline

Etsy's stock has dropped significantly after reporting a decline in sales and buyer activity. With an 80% fall from its peak, questions arise regarding the company's long-term viability amidst shrinking revenue and potential stagnation.

Date: 14-03-2025

AI Rating: 4

Etsy's Recent Performance
The report highlights significant issues for Etsy, particularly its declining sales figures. The value of merchandise sold on Etsy's platforms fell by 4.4% for the year, following previous declines of 1.2% in 2023 and 1.3% in 2022. This consistent pattern of falling sales indicates a troubling trend in revenue growth.

Sales and Active Buyers
The number of active buyers decreased by 2.6% year over year in Q4 2024, and habitual buyers dropped by 9.5%. These reductions point towards a possible saturation of the crafts market, suggesting that Etsy might be losing its appeal to consumers.

Earnings and Buybacks
Despite the falling sales, Etsy reported an increase in earnings, primarily due to the buyback of approximately 10% of its outstanding stock, which artificially inflated its Earnings Per Share (EPS). This buyback strategy, while favorable in boosting EPS, raises concerns that it might be masking deeper underlying issues with the company's core business performance.

Market Valuation
Etsy's price-to-earnings ratio of around 19.5, compared to eBay's 16.5, raises uncertainty about its future valuation. As decline trends continue, Etsy's P/E ratio could further decrease, affecting investor confidence and stock prices.

Stocks: ETSY