Etsy Q2 Earnings Preview: Expect a Bearish Outcome, Downgrading Rating.

Etsy is expected to report Q2 earnings, with the stock currently rated as a "buy" with a price target of $73 per share. However, the author downgrades the rating to a "bear trap" due to concerns about the company's performance. The author believes that Etsy's stock price is likely to experience a significant drop after the earnings report.

Etsy, Inc. (NASDAQ: ETSY) is set to release its Q2 earnings report on July 30, 2025, with the stock currently rated as a "buy" by some analysts, including a price target of $73 per share. However, a recent article by an investment analyst downgraded the rating to a "bear trap," expressing concerns about the company's performance and the potential for a significant stock price drop post-earnings release [2].

The downgrade is primarily based on Etsy's Q1 FY25 earnings, where gross merchandise sales (GMS) declined at an accelerating rate, and active buyers and sellers on the platform continued to decline. This led to a 6.5% YoY decline in GMS, with Etsy marketplace GMS down 8.9% YoY to $2.3B [1]. The analyst believes that the current projected growth rates in both revenue and earnings are not attractive enough to reignite investor optimism.

The analyst also cited macroeconomic uncertainty, recent tariff announcements, and a highly competitive environment as headwinds impacting Etsy's growth trajectory. Despite these challenges, Etsy continues to invest in product development, focusing on AI and ML for deeper personalization and enhanced customer engagement [2].

Etsy's stock has outperformed the S&P 500 since the analyst's previous bullish thesis, but the recent downgrade suggests that the company's initiatives to revamp its app experience and improve its search algorithm have not yet translated into the expected revenue acceleration. The analyst expects the current projected growth rates to remain unattractive, potentially leading to a significant drop in the stock price following the Q2 earnings report.

Investors should closely monitor Etsy's Q2 earnings report and the subsequent market reaction to assess the validity of the analyst's bear trap thesis. The company's ability to demonstrate signs of bottoming and reacceleration in GMS with active buyers and sellers returning to the platform will be crucial in determining the stock's future performance.

References:
[1] https://www.marketbeat.com/instant-alerts/filing-etsy-inc-nasdaqetsy-shares-sold-by-bank-of-new-york-mellon-corp-2025-07-15/
[2] https://seekingalpha.com/article/4802440-etsy-q2-earnings-preview-leaning-towards-bear-trap