Etsy (ETSY) stock fell in premarket trading today after Goldman Sachs downgraded it from a Neutral rating to a Sell. Analyst Eric Sheridan also lowered his price target from $70 to $40, demonstrating a cautious outlook on the company’s growth prospects due to the risk of its global market share declining. ETSY declined 4% before markets opened, and while it has since recovered, trading remains volatile. As of this writing, shares are up over 3%.
Over the past year, Etsy stock has struggled significantly, falling 40% year-to-date. Now, Goldman Sachs is predicting that its problems are likely to continue. Indeed, Sheridan’s new price target represents 9% downside potential from current levels.
Why Is Etsy Stock Down Today?
With this rating and price target downgrade, Goldman Sachs makes it clear that it sees further problems ahead for Etsy. The stock has been struggling for months while rivals such as eBay (EBAY) have made significant progress. This suggests that while the e-commerce market is still strong, Etsy is facing company-specific problems. Shifting Wall Street sentiment is also pushing it down today, and this trend is likely to persist.
Goldman Sachs’ analysis highlights the company’s declining Gross Merchandise Sales (GMS), which may fail to meet the anticipated 3% year-over-year increase. Additionally, Sheridan notes that Etsy’s global market share is likely to continue shrinking. “We expect the Etsy Marketplace to continue to lose market share of overall Global ex-China eCommerce sales,” he states.
The analyst also notes that “Street Adj. EBITDA estimates could be revised lower if GMS declines continue for longer than expected or if ETSY steps up growth investments.”
Is Etsy Stock a Buy, Sell, or Hold?
Sheridan’s bearish take on Etsy is consistent with Wall Street sentiment, which has been trending in a negative direction lately. Analysts maintain a Hold consensus rating on ETSY stock based on seven Buys, 11 Holds, and four Sells assigned in the past three months, as indicated by the graphic below. After a 24% decline in its share price over the past year, the average ETSY price target of $63.67 per share implies 26.48% upside potential.
Recent earnings reports haven’t done much to boost confidence in Etsy’s growth prospects. When the company reported earnings for Q2 2024 in late July, GMS sales fell 2.1%, and earnings per share came in below analyst estimates.
