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Why Etsy Stock Plummeted Today

By Jon Quast - Mar 3, 2021 at 5:26PM

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Will the e-commerce platform suffer as brick-and-mortar retail makes a comeback?

What happened

Shares of e-commerce platform Etsy (ETSY -2.03%) plummeted on Wednesday. Some see a connection with Texas' reopening. However, this explanation may fall flat, considering that many high-growth stocks like Etsy sold off today as well. Minutes before the market closed for the day, Etsy stock was down almost 13%.

So what

On March 2, Texas Governor Greg Abbott removed the state's mask mandate and allowed businesses, including restaurants, to fully reopen starting on March 10. Mississippi followed Texas' lead, and it's possible more states could hop on board as well. E-commerce companies like Etsy undeniably enjoyed unprecedented adoption while brick-and-mortar retail was operating in a limited capacity. So Etsy stock is selling off today as physical retail opens back up, or so the theory goes.

A rising red arrow breaks near the top, resulting in the tip of the arrow pointing down.

Image source: Getty Images.

While it's possible this is weighing on investors' minds, the theory seems inadequate to explain the entirety of Etsy's 12% decline. High-growth stocks were selling off across different sectors of the stock market on Wednesday, and it appears Etsy stock simply sold off with the rest.

Now what

On stressful days like today, I believe it's important for investors to remember what game they're playing. For me, with the majority of my investments, I'm simply trying to beat the average annual return for the stock market. I don't own Etsy stock personally, but even after falling today, it's still beating the S&P 500 over the past three years, one year, six months, and the year to date. Nobody likes to see an investment lose value, but shareholders can take solace in knowing this has still been a market-beating investment. Small pullbacks are normal.

Furthermore, I'd be surprised if reopening physical retail materially changed anything for Etsy in the long run. The platform gained impressive scale in 2020, with almost 62% year-over-year growth in active sellers and almost 77% year-over-year growth in active buyers. This scale makes the platform more compelling and will likely continue to attract new buyers and sellers for years to come.

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