Etsy's Sales Are on the Decline. Is the Stock Still a Buy?
(NASDAQ: ETSY) was a pandemic phenomenon, producing triple-digit growth for several consecutive quarters as shoppers found its exclusive, handmade masks and stayed on for other fun and unique products. But as shoppers eventually went back to physical stores and adjusted their spending to focus more on services, Etsy now struggles to maintain growth as sales have leveled off or declined.
Wall Street noticed the trend and Etsy stock is trading down 25% year to date. It also fell, in part, on a disappointing earnings report last week. Is this now a stock to avoid, or is there a buying opportunity here?
Let's first distinguish what is meant by declining sales. Etsy revenue in Q1 actually increased 10.6% over last year. However, consolidated gross merchandise sales (GMS) decreased by 4.6%, and Etsy marketplace GMS decreased by 4.7%. The consolidated results include Etsy as well as Reverb, Depop, and Elo7, other marketplaces it has acquired. That means consolidated sales, or the total amount shoppers spent, decreased, while Etsy's portion of that total, or its net revenue, increased. The increase in revenue can mostly be attributed to an increase in fees.
Source Fool.com
