Etsy's Stock Struggles Amid Declining Sales and Seller Exodus

Etsy encounters ongoing challenges as its stock price declines due to falling sales and a significant drop in active sellers. With recent disappointing earnings and a misguided acquisition strategy, investors remain cautious about the future potential of the company.

Date: 04-05-2025

AI Rating: 4

Etsy, once a booming marketplace during the pandemic, has faced significant challenges in the years following. The company's first-quarter earnings report highlighted a Gross Merchandise Sales (GMS) decline of 6.5%, dropping to $2.8 billion. This trend is reflective of a broader issue where both active sellers and active buyers have decreased, indicating a troubling exit of sellers from the platform. The seller base has plunged by 23%, now totaling just 5.4 million active sellers, with a corresponding decline in buyers.

This declining GMS and seller exodus raises critical concerns about the company’s profit margins and overall market appeal. The measures taken by Etsy, such as raising seller fees significantly—now at 23.3%—without a concurrent increase in sales performance, indicate a potential misalignment of business strategy with market demands.

The company also faced a significant write-off, taking an impairment charge of $101.7 million when it decided to sell Reverb, a move that highlights poor performance in its acquisition strategy. The $1 billion impairment in 2022 concerning its acquired brands suggests that these acquisitions have not yielded the desired results and have distracted management from the core business.

Investors might note that the acquisition of Depop appears to be a silver lining, with a promising GMS growth of 32% expected in 2024. However, the overall negative performance and management's failure to effectively address core issues overshadow this positive aspect.

Etsy's valuation may position it as a ripe target for activist investors, which historically have led to stock surges. However, consistent underperformance raises a cautious outlook from professional investors, who will need to see solid changes in management and strategy to recover the brand's relevance.

The below metrics represent professional investor sentiment based on Etsy's current situation:

Stocks: ETSY AMZN SHOP TGT