Shares are trading lower on Monday after Needham analyst Anna Andreeva cut her craft market rating to Hold from Buy, citing risks posed by a possible recession. If consumers cut spending, she warns, Etsy will likely feel the consequences.
Etsy (ticker: ETSY) was down around 5.3% around noon on Monday. The stock is down more than 60% since the end of 2021.
Andreeva’s opinion is that the discretionary nature of many Etsy purchases jeopardizes current financial estimates. She says second-quarter financial results appear to be on track, but adds that the company‘s second-half view assumed no change in the macro environment, and things have gotten worse since Etsy released its results. of the first trimester.
When Etsy released the numbers, Chief Financial Officer Rachel Glaser warned the company was seeing “increasing headwinds related to broader macroeconomic issues,” but she also said gross merchandise sales trends would improve over time. second half “assuming macroeconomic trends do not worsen”.
Andreeva believes that this assumption turned out to be too optimistic. Etsy did not immediately respond to a request for comment.
The analyst notes that Etsy has boosted demand with discounts: there was a two-day 20% promotion last week and a recent 30% discount offer to new buyers. She models a 3% decline in gross merchandise sales this year, with a 3% rebound in 2023, but says Street’s consensus for next year calls for 15% growth, a view she deems too optimistic.
“Longer-term, we appreciate Etsy’s unique business model, which over the past few years has evolved from a niche e-commerce market to a priority shopping destination across many categories, demographics and areas. geographic,” writes the analyst.
But she says that given “the predominantly discretionary nature of underlying demand and current consumer pressures in the United States and globally,” the company could remain under pressure.
She also sees a decline in subscriber trends. During the March quarter, active buyers were up 4.9% from a year ago, compared to 17.7% in the fourth quarter. For the full year, it expects the total to decline about 5% from 2021 levels.
Write to Eric J. Savitz at [email protected]