Etsy (ETSY) stock closed nearly 10% higher on Feb. 19, after the e-commerce firm divested Depop, its fashion resale platform, to eBay (EBAY) for $1.2 billion in cash.
On Thursday, Etsy reported better-than-expected per-share earnings for its fiscal Q4 as well, which helped its stock price push briefly above its 20-day moving average (MA). While this technical setup often precedes a relief rally, neither fourth-quarter release nor Depop sale warrant buying ETSY stock at current levels.
Despite today’s gains, Etsy remains down about 25% versus its year-to-date high.
Etsy sold its fashion resale platform for $1.2 billion, much less than the $1.62 billion that it spent on buying it nearly five years ago. The divestiture completes Etsy’s exit from its failed “house of brands” strategy — a diversification push that evidently didn’t create shareholder value.
Investors are cautioned against chasing the rally in ETSY shares also because its gross merchandise sales declined significantly on a currency-neutral basis in Q4 as the company’s core marketplace experienced contraction instead of growth.
Moreover, the NYSE-listed firm is losing its ability to attract active buyers as evidenced by a 2% year-over-year decline in users to 93.54 million, despite aggressive marketing investments.
Etsy stock remains unattractive as a long-term holding also because the company guided for up to $2.43 billion in gross merchandise sales for its fiscal Q1 — a huge step down from $2.8 billion last year.
This signals deteriorating consumer demand as inflationary pressures and economic uncertainty continues to weigh on discretionary spending.
Moreover, since ETSY remains decisively below its longer-term MAs (50-day, 100-day, 200-day), it’s reasonable to assume that the stock’s broader downtrend remains intact.
According to Barchart, the put-to-call ratio on options contracts expiring early March sits at 4.56x currently, indicating significant skew to the downside. The lower price of $43.83 on those contracts suggests Etsy could lose nearly 9% over the next few weeks.
