Online marketplace Etsy Inc (ETSY) is increasingly attracting the wrong type of sales interest – that of short-selling investors.
Pandemic Flourish Fades
The group which flourished in the pandemic when Americans hunted for face masks to protect themselves from Covid was also lifted by the subsequent boom in online shopping as people were forced to lock down at home. Etsy’s particular niche including bead making and craft kits fitted in well with people looking to fill in the long hours indoors making origami butterflies, jewellery and pottery for wives, husbands, children and dogs.
Five years on and we are in a different – though still highly volatile – world and the Etsy and online boom has faded as people return to work in the office and enjoy their leisure time outdoors.
In its most recent fourth quarter results, Etsy reported that marketplace Gross Merchandise Sales came in at $3.3 billion, down 8.6% year-over-year, a result of pressure on consumer discretionary product spending, challenging year-over-year comparisons in a shortened holiday season, category mix, and a highly promotional and competitive retail environment. That is the twelfth consecutive quarterly drop.
Active buyers came in at 89.6 million, down 2.6% year-over-year and again repeating a pattern seen for the last two years.
Pressure on Etsy Stock
Etsy stock, as a result, is now down over 80% from its 2021 peak, having lost just over 10% in the year-to-date and over 28% in the last 12 months.
Its slump has attracted the attention of short sellers. According to FactSet Data, as reported by Sherwood Media, short sellers now have control of 18% of Etsy’s free float or shares available for trading. That is the highest it’s been since Etsy listed back in 2015.
That is likely to put more pressure on management to turn the Etsy ship around. Its chief executive Josh Silverman recently said it had been trying to steer more of its customers from its online website to its app. That is intended to raise the long-term purchase activity of shoppers.
Whether that is enough for Etsy to craft a recovery only time will tell.
Is ETSY a Good Stock to Buy Now?
On TipRanks, ETSY has a Hold consensus based on 7 Buy, 14 Hold and 4 Sell ratings. Its highest price target is $76. ETSY stock’s consensus price target is $54.26 implying an 15.01% upside.
