Shares of Etsy (NASDAQ: ETSY) were heading lower today after the online marketplace for handmade and vintage products posted another quarter of disappointing results, including flat revenue growth and a decline in profits.
As a result, the stock was down 13.9% as of 1:14 p.m. ET.
Image source: Getty Images.
Etsy still needs help
Etsy was a pandemic success story, but since then the business has seen virtually no growth, even as we’re no more than two years past the peak of the Omicron COVID-19 variant.
Gross merchandise sales (GMS), the key metric that represents the total dollar value of goods sold on the platform, fell 3.7% to $2.99 billion, impacted in part by the sales of Elo7, a Brazilian online marketplace it sold last August after buying it just a couple of years earlier.
Revenue in the quarter ticked up 0.8% to $646 million as the company benefits from higher fees, and that essentially matched estimates at $646.3 million.
Active buyers only slightly increased by 0.9% to 96.4 million, though active sellers jumped 15% to 9.1 million, a positive sign.
Gross profit improved by 3%, but operating expenses rose by 6.4%, which led to a 1.4% decline in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $167.9 million. On a generally accepted accounting principles (GAAP) basis, earnings per share fell $0.53 to $0.48, slightly below the consensus at $0.49.
CEO Josh Silverman said, “Our first-quarter performance, while in line with our guidance, was pressured by the challenging environment for consumer discretionary product, which continues to be headwinds to Etsy marketplace growth.”
Can Etsy recover?
Etsy’s guidance wasn’t particularly inspiring either. The company called for a similar decline in GMS in the second quarter and expected a modest improvement in GMS growth in the second half of the year. It also said full-year adjusted EBITDA margins will be at least the same as 2023.
Etsy’s excuses about weak consumer discretionary growth are starting to ring hollow. Amazon just delivered solid e-commerce growth in its first-quarter earnings growth, with a 7% increase in its first-party online stores business and faster growth in its third-party seller services.
Other discretionary businesses seem to be turning the corner. Etsy has a strategic plan to turn the business around, but investors aren’t going to buy into it until it starts to show results. At this point, that doesn’t appear to be on the horizon.
Should you invest $1,000 in Etsy right now?
Before you buy stock in Etsy, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Etsy wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
See the 10 stocks
*Stock Advisor returns as of April 30, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Amazon and Etsy. The Motley Fool has positions in and recommends Amazon and Etsy. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
