What happened
Etsy (ETSY -2.17%) investors lost ground to a falling market early Tuesday. The e-commerce platform stock was down 4% by 11 a.m. ET compared to a 0.8% decline in the S&P 500. That drop continued a tough period of underperformance for the stock, which is down 52% in 2022 compared to the market's 25% decline so far.
Tuesday's slump was powered by that broader market drawdown, but also by some specific worries about Etsy's upcoming earnings report.
So what
The main factor was souring investor attitudes about global growth. The IMF lowered its 2023 forecast thanks to several major economic pressures, including inflation, a weakening U.S. economy, and the war in Ukraine. Many tech stocks declined on a day when the global growth outlook darkened.
Etsy highlighted a few of these pressures in its last earnings report, saying in late July that inflation and other economic headwinds contributed to a sharp slowdown in sales volumes through its platform. Etsy posted a 3% increase in Q2, after accounting for currency exchange rate swings, compared to a 31% increase in all of 2021. Investors understandably worried about how continuing economic pressures might further harm its growth outlook.
Now what
Etsy will provide more clarity in its upcoming earnings report, likely in early November. Back in July, management predicted that volumes would land between $2.8 billion and $3 billion, compared to $3.1 billion a year earlier.
Watch Etsy's buyer pool for signs of continued engagement despite the modest sales decline. Etsy has been outperforming peers like eBay on this score and might continue that positive momentum. Management is also predicting healthy profitability even if consumer spending keeps slowing. If Etsy can keep winning on these points, the stock has a good chance at recovering from down days like this.
