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

E-commerce company Etsy Inc ETSY reported fourth-quarter FY24 earnings yesterday. The following are the opinions of different analysts on the same.

Needham analyst Bernie McTernan reiterated a Buy rating on the shares and maintained a price forecast of $60.00. In the fourth quarter, GMS fell short of expectations, primarily due to ongoing challenges in consumer discretionary spending, noted the analyst.

Additionally, the company chose to focus on long-term initiatives instead of short-term growth, along with a shorter holiday season. The shift to long-term investments is estimated to have impacted GMS by a few hundred million, but it also laid the groundwork for initiatives expected to drive growth in 2025, such as personalization, a new marketing mix, and app development.

The analyst is taking a more conservative approach to the GMS model, assuming only a slight improvement in the YoY declines in the second quarter, 4% YoY declines in the latter half of 2025 and <1% GMS growth in ’26E, considering this as a prudent approach given the uncertainty from leadership changes, strategic shifts, and ongoing macroeconomic pressures on consumer spending.

ETSY is boosting customer engagement and frequency through initiatives like gifting, quality improvements, a new loyalty program, and app investments.

Gifting sales in 2024 outperformed the broader marketplace, contributing 29% to total GMS. Although its still early, management is seeing promising signs of increased frequency and user engagement on Etsy Insider, noted the analyst.

For FY25E, the analyst lowers GMS estimates by -6% and FY25E adj. EBITDA estimates come down by ~10%. The challenges impacting e-commerce consumer spending have affected the entire sector, but the analyst notes Etsy has the opportunity to emerge stronger.

By leveraging the larger scale gained during the pandemic, Etsy can enhance the user experience, which should drive increased consideration for the marketplace and more frequent purchases, concluded the analyst.

Also Read: Walmart Q4 Earnings Shine, But Soft FY26 Outlook Disappoints Street

Canaccord Genuity analyst Maria Ripps maintains a Buy rating on the shares and lowers the price forecast from $105.00 to $76.00.

The analyst said that Etsy posted mixed results for the quarter, with active buyers, GMS, and revenue falling short of expectations, while take rate and profitability exceeded forecasts.

Marketplace activity was sluggish in October and November, and the company acknowledged that prioritizing foundational product development over short-term GMS drivers led to a GMS headwind of several hundred million, impacting the fourth quarter and first quarter.

However, Etsy returned to a more balanced product development strategy at the start of the year, expecting benefits to grow throughout 2025.

With strategic initiatives like expanding Gifting, boosting loyalty program adoption, improving personalization, and increasing app downloads, management anticipates improving GMS year-over-year trends.

Nevertheless, the first quarter is expected to be another tough quarter, with GMS declining similarly to the fourth quarter. Profitability expectations were slightly below forecasts, with margins expected to improve in the second half of 2025.

Despite pressure on Etsy shares, the stock now trades at about 3x FY25 revenue and 10x adjusted EBITDA, suggesting significant negative sentiment is already priced in.

If consumer discretionary spending rebounds and growth initiatives yield stronger results, investor confidence could recover, with further upside if the de minimis exemption is repealed and competition eases, noted the analyst.

Price Action: ETSY shares are trading lower by 1.47% at $50.77 at the last check Thursday.

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