ETSY - Etsy: The Competitive Landscape Has Shifted (Rating Downgrade)

2024-06-20 13:24:07 ET

Summary

• Etsy is struggling with increased competition from platforms like Temu, resulting in potential brand dilution and alienation of core customers.
• Elliott Management has acquired a significant stake in ETSY, reflecting investor concerns and potential for increased pressure on management to improve efficiency.
• Etsy's revenue growth has stalled, market share is declining, and recent acquisitions have not met expectations, casting doubt on the company's strategy and long-term competitiveness.

Last year we downgraded our rating of Etsy ( ETSY ) because it was clear that growth was stalling, and the company did not have a coherent strategy to reignite revenue expansion. In hindsight, we should have been even more aggressive. While directionally we were correct, we should have been more aggressive with a double downgrade to "Sell". Not only was keeping the gains from the Covid period no longer enough, but the competitive landscape was already starting to shift in an unfavorable way for the company. Since then, it has become clear that competitive pressures from the likes of Temu ( PDD ) are making life much harder for Etsy, and the company has made some unforced errors as well. In our opinion, by trying to compete on all fronts for customers, it has diluted its brand and alienated some of its core buyers and sellers....

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