Shares of Etsy Inc. (NASDAQ: ETSY) are down approximately 7% since the company reported earnings on February 19. Concerns over slowing growth are overriding revenue and earnings that were up on a year-over-year basis and a dirt-cheap forward price-to-earning (P/E) ratio of around 8x.
[content-module:CompanyOverview|NASDAQ: ETSY]However, this is just a continuation of a trend that’s been in place since November 2021. ETSY stock is down over 80% from its meme stock-fueled high of around $295 per share.
While ETSY shareholders may cry foul at being lumped in with meme stocks like GameStop Corp. (NYSE: GME) and AMC Entertainment Holdings Inc. (NYSE: AMC), the fact remains that, like GME and AMC, investors pushed ETSY stock to an unsustainable level. And if you bought at the top, you’ve likely already sold at a big loss.
But with the stock trading at levels not seen since 2019, some investors are wondering if it is now a strong long-term buy. Unfortunately, it may be that the stock is fairly priced.
Growth Is Slowing, and It May Not Be Just the Economy
With quarterly revenue topping $850 million, Etsy has become more than just a niche site for hobbyists. However, investors are concerned about the company’s slowing revenue growth. In the last 12 months, ETSY’s revenue growth has only increased by 2.18%, which is significantly lower than its compound annual growth rate (CAGR) of 27.9%.
If you’re an investor or considering getting involved with ETSY stock, you could explain that away by pointing to the broader economy. Etsy is a two-way site that derives a healthy amount of its revenue from the listing fees that sellers pay for listing their items and the 5% fee it collects from each sale.
In 2020 and 2021, that revenue surged as many investors decided to try their hand at turning their hobbies into secondary, or primary, income. To illustrate that point, active sellers on ETSY jumped approximately 75% between 2020 and 2021 to 7.5 million. However, in January 2025, that number had stayed the same and was down 8.5% from the prior year.
So now you have the same number of net sellers, but quarterly revenue growth is at its lowest level since the company went public in 2014. And in the company’s recent earnings presentation, gross merchandise sales (GMS) were down 4.4%. GMS measures the dollar volume of transactions occurring on the platform, which is more meaningful than revenue, which was up 2.2% year-over-year.
Once again, if this was a one-year phenomenon, you could explain it away. But this is now four straight years of declining GMS. That fact, combined with a flat to lower number of sellers suggests that the value proposition of the platform may be declining.
Etsy May Be a Better Trade Than an Investment
[content-module:Forecast|NASDAQ: ETSY]At a time when retail stocks are under pressure, investors are right to be concerned about whether ETSY stock is a solid long-term investment. The bull case for Etsy is that it’s a small player with a tremendous growth opportunity in an e-commerce space that still has years of strong growth ahead. However, the trends suggest that Etsy is having a hard time breaking away from the perception that it’s just a niche site.
Of course, things could change. Investors won’t get more information until Etsy reports earnings again in May. Until then, ETSY stock appears to be more interesting as a short-term trade than an investment. The stock price has been consolidating, and the move higher on February 24 could be sustained if volume moves back to the average.
The Etsy analyst forecast on MarketBeat gives the stock a consensus Hold rating with a price target of $58.78, which is 9.8% higher than the closing price on February 24. That's intriguing, but it’s also mostly due to two analysts, Canaccord Genuity and Truist Financial, that give ETSY stock a $70 and $67 price target, respectively.
ETSY stock may be worth holding onto if you’re looking for a stock with long-term potential. But with many other compelling options in the retail/e-commerce space, it’s hard to look at ETSY as more than a Hold right now.
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