Etsy Stock at New Highs: Buy or Sell?

Etsy's stock has surged to a fresh 52-week high after Q2 earnings topped expectations, despite a decline in GMS and user numbers. Investors are bullish on the company's long-term vision, including AI-powered search and personalized marketing. With 6.1 million habitual buyers and millions of new ones acquired, Etsy is evolving its business model. However, the stock has pared back some of its gains since the high, leaving investors wondering if it's a breather before the next leg up or a sign to stay cautious.

Etsy's stock (ETSY) surged to a fresh 52-week high of $68.45 on July 30, following its second-quarter earnings report, which beat market expectations despite declines in gross merchandise sales (GMS) and user numbers. The stock has since pulled back, leaving investors to ponder whether this is a breather before the next leg up or a sign to stay cautious.

Etsy reported revenue of $672.7 million for Q2, up 3.8% year-over-year (YOY), which exceeded Wall Street's expectations. The company's take rate increased to 24%, contributing to the revenue growth. However, earnings per share (EPS) fell 39% annually to $0.25, missing estimates by a wide margin. Adjusted EBITDA slid 5.8% to $169 million, with a margin of 25.1%.

The mixed results did not deter investors, who are bullish on Etsy's long-term vision. The company is focusing on AI-powered search, personalized marketing, and "agentic shopping" experiences to drive growth. Etsy ended Q2 with $1.5 billion in cash and investments, and it flexed this strength by buying back $335 million worth of stock during the quarter.

Etsy's leadership is laser-focused on reigniting GMS growth, with four priorities: stronger discovery, smarter machine learning, rewarding loyal buyers, and deepening Etsy's human touch. The company also highlighted momentum heading into Q3, expecting GMS between $2.6 billion and $2.7 billion, a 24.5% take rate, and strong profitability with adjusted EBITDA margins estimated to be around 25%.

Analysts tracking Etsy expect the company's Q3 EPS to surge by 42% YOY to $0.64. Looking further ahead, the company is projected to report a profit of $2.82 per share in fiscal 2025, up 20% YOY, with further annual growth of 16% to $3.28 per share in fiscal 2026.

However, Etsy's stock is currently trading at a premium to its historical averages, with a forward earnings multiple of 22 and a price-to-sales ratio of 2.3. The stock has pared back some of its gains since the high, testing a major resistance zone around $68. While Etsy's Q2 results were mixed, the company's strategic gains and improving sales momentum have painted a rosier picture heading into Q3.

[1] https://www.barchart.com/story/news/33818475/is-etsy-stock-a-buy-at-new-52-week-highs