ETSY - Etsy: Competition And A Weak Economy Can Further Dampen Growth Staying On The Sidelines

2024-05-12 09:14:49 ET

Summary

• Etsy reported its Q1 FY24 earnings, where revenue grew just 0.8%, as GMS and adjusted earnings declined. However, the company grew its Active Buyers by 1.9% YoY to 91.6M.
• The company launched Gift Mode, an interactive gift shopping experience, and improved search relevance for buyers, in order to attract and accelerate the frequency and size of purchases.
• ETSY faces headwinds from declining consumer discretionary spending amid a tough macroeconomic and competitive landscape.
• While the company can deliver long-term upside, I expect short-term volatility to continue until the management is able to translate its initiatives into accelerating GMS on the platform.

Introduction & Investment Thesis

Etsy (ETSY) is an e-commerce marketplace for handmade and vintage items that has severely underperformed the S&P 500 and Nasdaq 100 YTD. The company recently reported their Q1 FY24 earnings , where revenue grew 0.8% YoY while adjusted earnings declined 1.4% YoY. The company has been facing headwinds from declining consumer discretionary spending, which has negatively impacted their Gross Merchandise Sales ((GMS)). While it remains committed to its product innovation, with the launch of Gift Mode and improving search capabilities for buyers on the platform to improve their experience and accelerate the frequency and size of purchases, the macroeconomic environment and the competitive landscape are continuing to push downward pressure on its margins....

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