ETSY Earnings: Etsy Stock Drops 12% on Weak GMS

Etsy (NASDAQ:ETSY) stock dropped nearly 12% in Wednesday’s after-hours trading. The company reported Q1 financials that were in line with analysts’ estimates. However, weakness in gross merchandise sales (GMS) irked investors, leading to a selloff in its shares. 

Etsy operates an online platform specializing in handmade and craft items. It’s worth noting that the company’s GMS, a key driver of its revenue, is under pressure due to macroeconomic headwinds, which impacted consumers’ discretionary product spending. 

Etsy – Q1 Performance 

Etsy’s consolidated revenue was $646 million in Q1, up 0.8% year over year and roughly in line with the Street’s estimates. The benefits from growth in payments and transaction fee revenue were mostly offset by the weakness in GMS. 

Etsy’s consolidated GMS declined 3.7% year-over-year to $3 billion in Q1. Moreover, Etsy marketplace GMS came in at $2.6 billion, down 5.3% year-over-year. While the company managed to grow the number of active buyers on its platform, GMS per active buyer for the Etsy marketplace (on a trailing twelve-month basis) declined 3.5% year-over-year. 

The company delivered earnings of $0.48 per share, down from $0.53 in the prior-year quarter. However, its EPS met the Street’s forecast.

Outlook Reflects Challenges Ahead

Etsy expects the macro headwinds to pose challenges in Q2 as well. The company expects its consolidated GMS to mark a low- to mid-single-digit decline in Q2. This will likely hurt its top line, which in turn could affect its overall growth rate.

Is Etsy a Buy or Sell Today?

Etsy stock is down about 14% year-to-date. Given the macro headwinds, Wall Street remains sidelined on Etsy stock. With eight Buys, 11 Holds, and three Sell recommendations, ETSY stock has a Hold consensus rating. 

Analysts’ average price target on ETSY stock is $75.65, which implies 8.47% upside potential from current levels. 

Disclosure