Etsy currently trades at $60.08 per share and has shown little upside over the past six months, posting a small loss of 4.3%. The stock also fell short of the S&P 500’s 8.2% gain during that period.

Is now the time to buy Etsy, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Is Etsy Not Exciting?

We don't have much confidence in Etsy. Here are three reasons we avoid ETSY and a stock we'd rather own.

1. Active Buyers Hit a Plateau

As an online marketplace, Etsy generates revenue growth by increasing both the number of users on its platform and the average order size in dollars.

Etsy struggled with new customer acquisition over the last two years as its active buyers were flat at 93.16 million. This performance isn't ideal because internet usage is secular, meaning there are typically unaddressed market opportunities. If Etsy wants to accelerate growth, it likely needs to enhance the appeal of its current offerings or innovate with new products.

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Etsy’s revenue to rise by 2.8%, a slight deceleration versus This projection is underwhelming and suggests its products and services will see some demand headwinds.

3. EPS Trending Down

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Sadly for Etsy, its EPS declined by 1.1% annually over the last three years while its revenue grew by 4.9%. This tells us the company became less profitable on a per-share basis as it expanded.

Final Judgment

Etsy isn’t a terrible business, but it doesn’t pass our bar. With its shares underperforming the market lately, the stock trades at 13.1× forward EV/EBITDA (or $60.08 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think other companies feature superior fundamentals at the moment. We’d suggest looking at our favorite semiconductor picks and shovels play.

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