Is ETSY a good stock to buy? We came across a bearish thesis on Etsy, Inc. on r/investing by HunterMichael92. In this article, we will summarize the bears’ thesis on ETSY. Etsy, Inc.’s share was trading at $53.35 as of March 10th. ETSY’s trailing and forward P/E were 38.38 and 18.02 respectively according to Yahoo Finance.
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Etsy, Inc., together with its subsidiaries, operates two-sided online marketplaces that connect buyers and sellers in the United States, the United Kingdom, and internationally. ETSY is facing significant near-term headwinds that cast doubt on its growth prospects and overall financial discipline. The company’s outgoing CEO, Josh Silverman, received over $200 million in stock-based compensation while the company pursued acquisitions that have largely failed, resulting in dispositions at roughly a 90% loss. These missteps have left Etsy with more than $3 billion in debt, raising concerns about leverage and capital allocation.
Despite this, the company has announced a non-expiring $1 billion share buyback program, which critics argue props up the stock artificially rather than investing in long-term growth. Etsy operates in a highly competitive marketplace increasingly saturated with mass-manufactured products and overseas sellers, putting pressure on margins and limiting organic expansion. Its partnerships with AI technology remain ambiguous and may ultimately threaten the platform’s core value proposition, as AI could allow buyers to engage directly with sellers, reducing the need for Etsy as an intermediary.
The company’s high valuation, with a P/E of 38, stands in stark contrast to eBay’s P/E of 20, despite eBay demonstrating superior scale, margins, and growth since 2021. This combination of aggressive executive compensation, failed acquisitions, high leverage, limited growth, and structural threats from AI suggests that Etsy’s current stock price overstates its intrinsic value.
Analysts see limited upside, with a price target in the low $30s, reflecting the potential for further declines as market realities and financial pressures weigh on the company. Investors should approach Etsy with caution, as near-term risks appear to outweigh any support from share buybacks or short-term market optimism making it a bearish thesis.
Previously, we covered a bearish thesis on Etsy, Inc. (ETSY) by Kostadin Ristovski, ACCA in November 2024, which highlighted stagnant buyer growth, low-quality listings, heavy marketing spend, and poor acquisitions. ETSY’s stock price has appreciated by approximately 2.61% since our coverage. HunterMichael92 shares a similar view but emphasizes excessive executive compensation, high debt, aggressive buybacks, and AI risks, adding near-term financial pressures.
Etsy, Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 49 hedge fund portfolios held ETSY at the end of the fourth quarter which was 46 in the previous quarter. While we acknowledge the risk and potential of ETSY as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ETSY and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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Disclosure: None.
