Etsy’s stock (ETSY) has taken a significant hit this year, losing nearly 38% of its value. Now, Goldman Sachs analyst Eric Sheridan is raising a red flag, warning that the downtrend may continue. He downgraded Etsy’s rating from Neutral to Sell, pointing to a number of troubling factors.
Sheridan’s primary concern is the decline in Etsy’s gross merchandise sales. He notes that these sales have been falling for longer than anticipated, and there’s little clarity on when a turnaround might occur. This lack of visibility into future growth is a major cause for concern.
Adding to the bleak outlook, Sheridan predicts that Etsy will continue to lose market share in the global e-commerce market. His analysis suggests that Etsy’s active buyer growth is muted, and the overall e-commerce landscape is becoming increasingly competitive.
Further compounding the issue is the risk of margin compression in 2025. This means that Etsy may have to cut into its profit margins to remain competitive, potentially impacting profitability.
Sheridan’s assessment contradicts current Wall Street expectations, which anticipate a significant rebound in Etsy’s gross merchandise volume. However, he believes these expectations are unrealistic given the lack of evidence to support such a rebound.
While Etsy’s stock saw a slight uptick on Tuesday, Sheridan argues that the risk/reward profile remains unfavorable. He warns of potential further downward revisions to medium-term consensus estimates, suggesting that the stock’s decline may not be over.
This news comes as a blow to Etsy, which has been struggling to maintain its position in a rapidly evolving e-commerce market. As the competition intensifies, it remains to be seen whether Etsy can find a way to turn the tide and regain its lost ground.