Etsy Shares Fall Despite Positive Revenue

Etsy shares took a hit after the craft sales platform revealed modest financial projections, causing concern among investors. While the fourth-quarter results surpassed expectations in terms of revenue, profits fell short of FactSet consensus forecasts.

What's Behind the Numbers?

Etsy's first-quarter forecast predicts a decrease in gross merchandise sales compared to the previous year, contrary to Wall Street expectations of a slight gain. Management attributes this decline to reduced consumer spending on non-essential items, intense retail competition with promotional offers, and overall economic uncertainty.

Market Reaction

Following the earnings report, Etsy's stock price dropped over 7% to $71.49 in early trading on Thursday. This decline occurred even as the Nasdaq Composite saw a 2% increase.

Analysts' Perspective

Despite the short-term setbacks, several analysts believe in the long-term growth prospects of Etsy and recommend buying the stock based on these factors.

Analysts Share Differing Views on Etsy's Performance

BTIG's Marvin Fong remains optimistic about Etsy's future, emphasizing the strength of management and the quality of the franchise. Fong anticipates potential growth in merchandise sales later in the year, attributing it to various initiatives including reduced delivery times and a loyalty program. Despite lowering the price target to $87 from $90, Fong maintains a Buy rating on the stock.

Financial Outlook and Projections

During a recent call discussing the results, Chief Financial Officer Rachel Glaser expressed confidence in Etsy's ability to sustain "very healthy" margins and projected adjusted Ebitda margins for 2024 to be on par with those achieved in 2023.

Mixed Analyst Sentiment

Steven Forbes of Guggenheim echoed positivity regarding Etsy's adjusted Ebitda margins, mirroring his expectation of flat to improved performance. Forbes reiterated a Buy rating with a $95 price target.

However, not all analysts share the same optimism. While approximately 43% of analysts have assigned a Buy rating to the stock, 9% recommend selling, and nearly 50% suggest holding.

"We think ETSY’s execution is solid," commented KeyBanc's Ashley Owens. The company's recent initiatives have been deemed "positive for the long-term story." However, Owens highlights the need for a more stable backdrop before becoming more constructive. Despite this cautious approach, Owens rates the stock at Sector Weight and refrains from setting a specific price target.