Shares of homemade goods-related e-commerce site Etsy (ETSY 3.87%) sank 12.3% on Monday as of 1:44 p.m. ET.
The magnitude of Etsy's fall today was likely augmented by a big surge in the stock yesterday, after the company announced a partnership with artificial intelligence (AI) darling ChatGPT.
However, not only did Wall Street analysts pour cold water on the benefits of the partnership today, but a worse-than-expected consumer sentiment reading took down most consumer discretionary stocks across the board as well.
Etsy's enthusiasm is curbed
Yesterday, Etsy surged about 16% when OpenAI announced a new capability for users to check out items on Etsy without leaving the ChatGPT app. Etsy was the first OpenAI partner to announce the feature, but Shopify (SHOP -0.21%) is apparently lined up as a second partner in the near future.
But today, sell-side analysts at both Morgan Stanley and Stifel poured cold water on the enthusiastic response, with Morgan Stanley's Nathan Feather writing:
... the roughly 16% move seems overdone and it's far less clear if agentic commerce is Etsy's friend or foe over the long term... if buyers no longer visit Etsy to make a purchase, it doesn't own the customer experience. This could reduce customer loyalty and make Etsy more dependent on agentic platforms for volume.
Meanwhile, Stifel's Mark Kelley noted the checkout was a nice feature, but questioned how beneficial it would be, since OpenAI clearly will partner with other e-commerce companies as well.
Also acting as a headwind, The Conference Board released the September consumer sentiment reading today, which showed a 94.2 reading, down 3.6 points from last month and below the expected 96.0. Etsy's holiday quarter demand could struggle if consumers feel less confident about their financial future.
Image source: Getty Images.
Etsy isn't cheap, even after today's plunge
Etsy currently trades around 24 times 2026 earnings estimates, but those earnings are currently projected to double relative to 2025. If consumers pull back and Etsy's financials don't live up to those high expectations, there could be more downside.
Meanwhile, it's unclear whether chatbots will be a help or harm to e-commerce sites. If ChatGPT referrals lead to more complementary traffic beyond Etsy's core users, it could be a win-win. But if Etsy becomes dependent on external partners for traffic, it could wind up paying out a bigger chunk of revenue in referral fees to these partners, lowering future margins.
