Shares of e-commerce marketplace Etsy (ETSY -7.54%) disappointed investors on Wednesday after it reported its financial results for the fourth quarter of 2024. The company is struggling to grow and retain its user base. And those concerns explain why Etsy stock was down 8% as of 1:50 p.m. ET.
It wasn’t all bad, but there are troubling trends
Etsy owns a few e-commerce platforms. However, on its core Etsy platform, active buyers were down nearly 3% year over year to 89.6 million and average order value was down as well. This led to a nearly 9% drop in gross merchandise sales (GMS). The numbers could certainly be worse, but they’re troubling nevertheless.
Etsy’s Q4 revenue was still up 1% to $852 million because it improved its take rate, primarily with advertising. This contributed to a massive 56% improvement in net income, which came in at $130 million. So the report wasn’t all bad.
However, the health of Etsy’s business is measured by how many active buyers and sellers it has. Looking at the consolidated numbers from all of its platforms, its buyers dropped 1%, and its sellers dropped 10%. That’s a concerning trend for anyone thinking of investing in Etsy stock.
Etsy’s uninspiring outlook
Etsy CEO Josh Silverman said, “We are moving with urgency to increase buyer engagement, drive more sales, and return to GMS growth.” Unfortunately, that urgency doesn’t change anything in the near term. For the upcoming first quarter of 2025, management expects to report numbers similar to Q4, showing a sales drop mitigated by a better take rate.
As of this writing, Etsy stock trades at about 20 times its earnings, which I think is more than fair considering that engagement on its platform is dropping. The company has a solid balance sheet and is profitable, so it’s not a dire situation. But without better growth in 2025, I think Etsy stock will struggle to go up.
