What happened
Etsy (ETSY -0.22%) shareholders saw more volatility on Wednesday as the stock fell 6% by 3 p.m. ET, compared to a 0.9% drop in the S&P 500. That decline added to a tough year for owners of the e-commerce platform, which is down 43% so far in 2022.
The slump came as investors lost a bit of the enthusiasm they had developed earlier in the week about stabilizing economic growth trends.
So what
Markets fell on Wednesday, with the Nasdaq Composite Index declining 1%. This move reversed part of the gains that investors saw earlier in the week, which helped push Etsy's shares higher.
The stock had an especially good day on Monday as investors became less pessimistic that a global recession may be on the way. Seen in that context, today's decline represents a modest sentiment swing in the other direction.
Etsy's stock is sensitive to changes in investors' economic outlook. As Netflix executives pointed out this week, shifting macroeconomic trends, such as inflation, a strengthening U.S. dollar, and rising interest rates, are creating an unusually cloudy outlook. Netflix said on Tuesday that management has "less-than-normal visibility" into their short-term forecasts right now.
Now what
That environment means investors can expect more volatility, in general, including with Etsy's stock price. The good news is that the company will report its Q3 results by early November.
That announcement will include key updates on growth metrics like the buyer pool, merchandise-sales volumes, and seller fees. These metrics were generally solid in Etsy's last update in late July, but a modest decline in sales volumes had investors worried about its status as a growth stock.
Etsy can calm some of those fears by meeting or beating management's Q3 forecast calling for sales between $540 million and $575 million. That wide range reflects the same tough forecasting conditions that Netflix executives cited this week and helps explain why the stock has been so volatile in the weeks leading up to its Q3 earnings report.
