1 Must-Know Risk for Etsy Investors

Core Viewpoint - Etsy's stock has significantly declined, trading 83% below its peak in November 2021, despite a forward P/E ratio of 8.9 indicating potential value opportunity [1] Company Performance - Revenue increased by 2.2% in 2024, but gross merchandise sales (GMS) fell by 4.4%, marking a decline for three consecutive years since the peak in 2021 [4][5] - Active sellers and buyers decreased by 10% and 1.1%, respectively, from Q4 2022 to Q4 2023, indicating a worsening value proposition [7] Market Context - The global e-commerce spending is projected to grow by 19% annually through the end of the decade, which should benefit companies like Etsy, yet Etsy has not capitalized on this trend [5] - The retail and e-commerce sectors are highly competitive, with Etsy's unique offerings of vintage and handcrafted goods helping it stand out [9][10] Consumer Behavior - Etsy's differentiation may hinder repeat purchasing, as consumers tend to visit for special occasions rather than regular shopping [11] - The number of habitual buyers, defined as those shopping on six or more days and spending at least $200 annually, has decreased from 8.1 million to 6.4 million over three years [12] Leadership Insight - Etsy's CEO attributes the decline in performance to "pressure on consumer discretionary product spending," particularly affecting categories like furniture, apparel, and jewelry [6]