Etsy: Get Out While You Still Can

Summary

• I'm reiterating my sell rating on Etsy after its Q3 results showed a continued weakening in its GMS trends, which declined -4% y/y (2 points worse than in Q2).
• Etsy is guiding to a potential worsening of GMS trends in Q4 as well, signaling a low to mid-single digit decline.
• These reductions in GMS are coming amid an increase in marketing spend for Etsy, which is proving ineffective at winning customers back.
• Sell Etsy and invest elsewhere, as it struggles to compete with giants like Amazon and faces waning demand post-pandemic. Though cheap at <10x forward adjusted EBITDA, Etsy is a value trap.

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As we approach the end of the year, careful stock-picking has to be top on every investor's mind: richly valued and poor performing stocks have to be pruned from our portfolios. We should be especially careful with

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.