Proactive Investors - Etsy (NASDAQ:ETSY) Inc (NASDAQ:ETSY, ETR:3E2) shares plunged more than 13% after the online marketplace focused on handmade and vintage items posted a quarterly earnings miss amid a slowdown in discretionary consumer product spending.
Etsy shares traded down 13.6% at about $60 late morning on Thursday.
For the first quarter ended March 31, 2024, the company’s revenue was up 0.8% year-over-year to $646 million, slightly below estimates of $646.4 million.
Earnings per diluted share were $0.48, down from $0.53 for the same period in 2023 and missing estimates of $0.51.
Gross merchandise sales (GMS) were down 3.7% from the year-ago quarter to $3 billion.
“Our first quarter performance, while in line with our guidance, was pressured by the challenging environment for consumer discretionary products, which continues to be a headwind to Etsy marketplace growth,” Etsy CEO Josh Silverman commented.
“That said, we are encouraged by the meaningful progress we have made to improve customer experiences that we expect will drive buyer consideration and frequency over time, and we are working with focus and urgency to set the foundation to reignite Etsy marketplace growth."
Etsy’s Q1 results display continued weakness at the core of its marketplace, analysts at Jefferies believe.
“Habitual declines in core GMS despite incremental marketing investments further questions the size of Etsy’s total addressable market and current 50% premium to Ebay’s multiple,” they wrote.
They added that Etsy’s Q2 guidance implies no sequential improvement in GMS and would represent a 10th straight decline.
“The outlook for limited margin expansion in fiscal 2024 despite take-rate upside and cost savings suggest further investments into unproven customer acquisition channels,” they wrote.
The analysts reiterated their ‘Underperform” rating on the stock and $50 price target.
Meanwhile, Oppenheimer analysts lowered their price target on Etsy following its earnings from $80 to $75 but maintained their ‘Outperform’ rating.
They believe Q1 should mark the tough in GMS declines as consumers avoid discretionary purchases within key Etsy categories such as home, jewelry and apparel.
They see gifting as the largest opportunity for the company, pointing out that gifting GMS grew low single-digits year-over-year at about 20% of overall GMS.