Etsy (ETSY) stock plummeted out of the gate Wednesday after the online marketplace beat profit expectations but came up short of revenue estimates for its fourth quarter.
In the three months ending December 31, Etsy's revenue increased 1.2% year over year to $852.2 million. Its earnings per share (EPS) rose 66.1% from the year-ago period to $1.03.
Etsy also said gross merchandise sales (GMS) decreased 6.8% to $3.7 billion, active sellers decreased 10% to 8.13 million and active buyers decreased 1.1% to 95.46 million compared to the year-ago period.
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"Despite facing significant gross merchandise sales headwinds in 2024, we are proud to have delivered year-over-year revenue growth and very strong profitability, while simultaneously investing in our future," said Etsy CEO Josh Silverman in a statement.
Silverman added that "foundational improvements" to Etsy's marketplace are "enhancing customer experiences," and he believes this "will further differentiate the Etsy experience, driving consideration and purchase frequency as we work to get back to GMS growth."
The company's headline results were mixed compared with analysts' expectations. Wall Street was anticipating revenue of $861.8 million and earnings of 93 cents per share, according to CNBC.
For its first quarter, Etsy said it expects GMS to decline at a rate similar to its performance in the fourth quarter.
"We see several factors that we believe should position the Etsy marketplace for improved GMS performance beyond the first quarter," said Chief Financial Officer Lanny Baker in a statement. "In addition, we're committed to maintaining a strong bottom line and generating healthy free cash flow, while also investing in the things which will further differentiate Etsy, build our opportunity, and drive our long-term growth."
Is ETSY stock a buy, sell or hold?
Etsy has lagged the broader market over the past 12 months, down 32% vs the S&P 500's 24% total return (price change plus dividends). And Wall Street remains on the sidelines when it comes to the consumer discretionary stock.
According to S&P Global Market Intelligence, the average analyst target price for ETSY is $62.86, representing implied upside of over 16% to current levels. This is likely the result of the share price falling faster than analysts' can keep up with vs expectations for a big rally. Meanwhile, the consensus recommendation on the mid-cap stock is a Hold.
Financial services firm Jefferies is one of those with a Hold rating on ETSY, along with a $54 price target.
"We could see gross merchandise sales growth accelerating in the second half of 2025 as a result of easier comparisons created by efforts to shift resources toward long-term improvements that have driven 'several points' of near-term headwinds to GMS, but could potentially yield benefits to frequency and buyer spend over time," says Jefferies analyst John Colantuoni.
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