Why Etsy's 80% Stock Plunge Might Not Be the End of Its Troubles

Core Viewpoint - Etsy's stock has fallen significantly after reporting its 2024 earnings, with a decline of around 10% recently and over 80% from its peak in late 2021, indicating potential ongoing troubles for the company [1] Company Overview - Etsy operates marketplaces connecting buyers and sellers, with its main platform accounting for approximately 86% of its revenue in 2024 [2] - The company also owns Reverb and Depop, which together contribute about 24% to its revenue, indicating that the Etsy platform is the most critical business unit [3] Business Performance - Following a surge in investor interest during the pandemic, Etsy's merchandise sales value fell by 4.4% in 2024, continuing a trend of declines from previous years (1.2% in 2023 and 1.3% in 2022), suggesting a shrinking business [5] - In contrast, merchandise sales had more than doubled in 2020 and increased by 31% in 2021, driven by pandemic-related demand, but the market appears to be saturated now [6] Buyer Engagement - The number of active buyers decreased by 2.6% year-over-year in Q4 2024, with average purchases down by 3.5%, and habitual buyers fell by 9.5%, indicating potential buyer fatigue [7] Earnings Analysis - Despite weakening fundamentals, Etsy's earnings rose due to the company buying back 12.2 million shares in 2024, which increased earnings per share by approximately 10%, potentially masking deeper business issues [8] Valuation Considerations - With Etsy's stock losing nearly all pandemic-era gains, its current price-to-earnings ratio is around 19.5, compared to eBay's 16.5, suggesting that Etsy's valuation may continue to decline [9]