The dreary performance appears to fall on a number of factors, including IPO over-exuberance from investors, who are used to IPOs delivering strong returns in recent years and perhaps overlooking the fundamentals of this particular company, as well as an earnings report in the middle of May that threw up even more warning signs. Among them were rapidly increasing expenses, declining growth from product sales on its site, and warnings over second quarter earnings from management, which predicted that expenses would continue to grow while overseas sales may be negatively impacted by the stronger U.S dollar.
Etsy, which offers an online marketplace for the sale of handcrafted and unique items, is also at risk of potentially deadly competition from Amazon.com, Inc. (NASDAQ:AMZN), which teased in late May that it would launch its own Amazon Handmade service, and has even reportedly been wooing current Etsy sellers, some of whom make six-figure salaries selling highly popular, money-making items on the platform such as candles, clothing, and accessories.
The threat of Amazon.com, Inc. (NASDAQ:AMZN) is particularly worrisome given that Etsy’s revenue growth in the first quarter was largely fueled by selling services to the people who power the site, its sellers. Should Amazon come along with a superior (and cheaper) service, one that allows sellers access to an even wider audience of customers, it’s not hard to envision Etsy’s current revenue growth drying up quickly.
Despite all that, Tiger Global Management is not fazed, and seemingly believes that Etsy will continue to grow and that there is space for both it and Amazon.com, Inc. (NASDAQ:AMZN) in the handcrafted online marketplace. Whether other investors are as keen, only time will tell. Tiger Global Management is the only known shareholder of Etsy among the investment firms in our database at this time.