Thanks to the immediate surge in online shopping after the onset of the COVID-19 pandemic, Etsy (ETSY 0.08%) shares rocketed higher. They were up 610% over the 24-month period leading up to their peak in November 2021, as activity on the marketplace was robust. But softer growth since then has pressured shares, which now trade 81% below the record.
Here are three things investors need to know about this e-commerce stock.
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1. Achieving growth is challenging
The core Etsy marketplace handled $10.5 billion in gross merchandise sales (GMS), or the dollar amount of transactions that occur on its platform, in 2025. That was down 4% year over year. And it was down 14% compared to a record of $12.2 billion in 2021. Etsy has been in decline since the depths of the pandemic crisis.
I believe this points to a sobering reality, which is that there aren't a growing number of consumers interested in special, handcrafted, and unique goods. For what it's worth, management expects "slight year-over-year growth in GMS" in 2026.
2. Wasting shareholder capital
In the summer of 2021, Etsy bought secondhand fashion marketplace Depop for over $1.6 billion. This was part of previous CEO Josh Silverman's "House of Brands" strategy to enable Etsy to cater to various niche categories.
We're almost five years past that acquisition, and Etsy has decided to sell Depop to eBay for $1.2 billion. That's a roughly 25% haircut that destroys shareholder capital. And it follows other recent divestitures, with Etsy selling Reverb in 2025 and Elo7 in 2023.
Now, the company can focus exclusively on its flagship marketplace under CEO Kruti Patel Goyal, who took the top job at the start of this year.
NYSE: ETSY
Key Data Points
3. Etsy's Valuation
When assessing a stock that has gotten so crushed, buying it might make sense if value investors are interested. Is Etsy a smart buying opportunity?
The fact that the business possesses a network effect is certainly a favorable attribute. As of Dec. 31, the Etsy marketplace had 5.6 million active sellers and 86.5 million active buyers all across the globe, which creates a two-sided platform that improves as the user base expands. It would be difficult for a rival marketplace to scale up to Etsy's size because it would need to attract buyers with no sellers and vice versa.
Etsy trades at a price-to-sales ratio of 2.3, 68% below its historical average. However, I don't think that's enough to justify buying the stock. Until there's a return to consistent revenue and profit growth, investors should stay away.
