Etsy Stock Is Sliding Today: What's Going On?

Etsy Inc ESTY shares are trading lower Tuesday. Morgan Stanley lowered its price target on the stock ahead of the open. 

What Happened: Morgan Stanley analyst Lauren Schenk maintained Etsy with an Equal-Weight rating and cut the price target from $79 to $74, citing growth concerns. 

"Our new LTV/CAC model shows ETSY is hitting limits on its ability to profitably add larger cohorts. We estimate ETSY's 5-year LTV/CAC has nearly halved from 3.5x in 2018 to 1.9x in 2022," Schenk said.

The Morgan Stanley analyst estimated that Etsy's lifetime value per customer has declined about 30%, driven by inflated customer acquisition costs.

The company's COVID pull-forward captured most of the low customer acquisition opportunity, which sets Etsy up for increasingly expensive GMS growth moving forward, Schenk said: "It appears the low-hanging fruit has largely been picked."

The pandemic transformed Etsy from a fast-growing company to a mature marketplace, which is likely to weigh on valuation, the analyst said.

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ETSY Price Action: Etsy shares were down 5.75% at $92.22 at the time of writing, according to Benzinga Pro.

Photo: jschauma from Flickr.