Etsy Stock Declines Amid Q4 Shortfall But Long-Term Strategy Could Pay Off, Say Analysts

Etsy (ETSY) stock experienced a significant drop of over 9.3% to $51.94 following the release of its fourth-quarter earnings report, which revealed a modest revenue growth of 1.2% to $852.2 million, falling short of analysts' expectations of $861.8 million. Despite an increase in earnings per share (EPS) to $1.03 from $0.62 in the previous year, which exceeded the anticipated $0.93, the number of active buyers on the platform decreased by 2.6% year-over-year to 89.6 million. Additionally, Gross Merchandise Sales (GMS) saw a decline of nearly 7% to $3.74 billion, missing the forecasted $3.84 billion. Looking ahead, Etsy anticipates a similar 6.8% drop in GMS for the first quarter, aligning with the decline experienced in the fourth quarter of 2024.

Despite the recent stock price decline, some analysts remain optimistic about Etsy's long-term prospects. Needham analyst Bernie McTernan reiterated a Buy rating on the shares and maintained a price forecast of $60.00, noting that the company's focus on long-term initiatives, such as personalization, a new marketing mix, and app development, is expected to drive growth in 2025. Additionally, Canaccord Genuity analyst Maria Ripps maintained a Buy rating on the shares and lowered the price forecast from $105.00 to $76.00, acknowledging that while Etsy posted mixed results for the quarter, its strategic initiatives, such as expanding Gifting and boosting loyalty program adoption, could improve GMS year-over-year trends.

Etsy's strategic focus on quality, reliability, and discovery in its app differentiates it from competitors by emphasizing the unique, handmade, and creative nature of its products, which resonates with a specific segment of consumers who value authenticity and individuality. This focus on quality and authenticity appeals to consumers who seek out distinctive products that reflect their personal style and values, while the app's algorithms and personalized recommendations help users find products they love, creating a more engaging and satisfying shopping experience. By expanding Gifting and boosting loyalty program adoption, Etsy can drive more sales and increase GMS, ultimately contributing to its long-term growth strategy.



Etsy's acquisition of Depop in 2021 has contributed significantly to its long-term growth strategy by expanding its reach into the re-commerce market, which has seen favorable trends. Depop's fourth quarter GMS was the highest it has been since the acquisition, contributing to full year GMS growth of 31.6%, as the marketplace benefited from share gains in the United States and favorable trends in re-commerce. By integrating Depop into its ecosystem, Etsy can attract and retain younger shoppers, ensuring long-term growth and relevance.

In conclusion, while Etsy's stock price has declined following its fourth-quarter earnings report, analysts remain optimistic about the company's long-term prospects. Etsy's strategic focus on quality, reliability, and discovery, along with its acquisition of Depop and expansion into the re-commerce market, positions the company well for long-term growth. By leveraging these strengths and executing on its strategic initiatives, Etsy can drive GMS growth and create value for shareholders.