Etsy Plunges 28% in a Year: Should You Hold or Fold the Stock?

Etsy ETSY shares have plunged 28.4% in the trailing 12-month period, underperforming the Zacks Retail-Wholesale sector and the S&P 500 index’s return of 11.2% and 6.9%, respectively. The stock has also underperformed the Zacks Internet – Commerce industry’s appreciation of 16.1% in the same time frame.The company’s underperformance is largely due to weak consumer discretionary spending amid macroeconomic challenges. The e-commerce market is currently facing a slowdown in consumer discretionary spending, particularly among lower household income buyers. This has contributed to a 4.4% year-over-year decline in Etsy’s gross merchandise sales (GMS) in 2024. With ongoing economic pressures, this trend is expected to persist, further weighing on ETSY’s marketplace sales in the coming years.Etsy is also suffering from intensifying competition in the e-commerce space. It is a substantially smaller company compared to online retail behemoths, such as Amazon AMZN, eBay EBAY and Alibaba BABA. Amazon keeps its retail business very hard to beat on price, choice, and convenience with the help of a solid loyalty system in Prime, while eBay continuously makes strong efforts to deliver a better buying and selling experience to buyers and sellers, respectively. Alibaba serves about 80% of the Chinese e-commerce market and is taking steps to strengthen its position outside China. Shares of Amazon, eBay and Alibaba have gained 5.2%, 29.5% and 80.2%, respectively, in the trailing 12 months.In response to these challenges, Etsy has planned a few strategic initiatives for 2025 to improve its GMS. It plans to enhance search and discovery using AI, improve the buyer experience with smoother navigation and checkout, and support sellers with better tools and ad services. The company will expand marketing efforts, invest in AI-driven personalization and grow internationally through localization and optimized logistics to drive global sales. These initiatives are expected to boost Etsy's GMS by attracting more buyers through improved search functionality, enhancing the overall shopping experience, and helping sellers to reach a broader audience, ultimately driving increased sales and long-term growth for the company.Etsy, Inc. Price and Consensus Etsy, Inc. price-consensus-chart | Etsy, Inc. QuoteThe Zacks Consensus Estimate for Etsy’s first-quarter 2025 earnings per share is currently pegged at 53 cents, suggesting a decline by a penny over the past 30 days. The estimate indicates year-over-year growth of 10.42%. The consensus mark for revenues is pegged at $644.45 million, indicating a year-over-year decline of 0.23%.Etsy missed the Zacks Consensus Estimate for earnings in three of the trailing four quarters and beat once, with the negative average surprise being 5.29%.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Conclusion: Hold ETSY Stock for NowEtsy has established a strong niche, catering to unique, handmade, and vintage products, which has made it a go-to platform for sellers and buyers seeking such goods. However, these products tend to be expensive, and macroeconomic challenges have led consumers to cut back on discretionary spending, affecting Etsy’s sales. Despite recent challenges, including declining GMS and intensified competition from giants like Amazon, Etsy has focused on key growth initiatives like improving search, discovery and customer experience. Its expanding global reach and personalized services also position it well for long-term growth, though macroeconomic headwinds may continue to impact performance.Etsy currently carries a Zacks Rank #3 (Hold), suggesting that it may be wise for investors to wait for a more favorable entry point in 2025. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.3% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amazon.com, Inc. (AMZN): Free Stock Analysis Report eBay Inc. (EBAY): Free Stock Analysis Report Alibaba Group Holding Limited (BABA): Free Stock Analysis Report Etsy, Inc. (ETSY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks