Is Etsy Stock Dead Money Now?

  • Etsy has yet to make money.
  • Its niche is small, its market not deep.
  • Time to put this loser to sleep.

Etsy (NASDAQ:ETSY) is an Internet stock that behaves like an oil stock. This is not a compliment.

Since going public in April, Etsy stock has delivered its investors nothing but a gusher of loss. The first trade came in at $30. The stock traded on December 22 at $8.25.

ETSY stock chart

Source: Etsy stock price chart by amigobulls.com

How is this possible? Etsy bills itself as a peer-to-peer network where artisans and their customers connect and do business. It’s fully buzzword compliant with companies such as eBay (NASDAQ:EBAY), Square (NYSE:SQ) and Uber, in that most of the work involved is not done by Etsy, which simply provides a means for them to do it and takes a cut of what they do.

It hasn’t worked out that way. Etsy has not broken even since 2013, and it has yet to record a net profit for any quarter in 2015. For the September quarter it lost $6.89 million on revenues of $65.7 million. The balance sheet shows just $6.48 million of long term debt on $538 million in assets, but operating cash flow has been anemic, coming in at about $41 million total for the first three quarters of the year.

Most of its cash flow comes in on the investment line, which means Etsy is mainly burning investment cash. It’s a slow burn, like that of a cigarette rather than a jet engine, but it’s still a burn.

What makes Etsy different from other Web sites is that it is basically a cul de sac. Its merchants, frightened to death that someone might steal their designs, don’t link as, say, Amazon sellers do. Instead of selling home-made art, most of Etsy’s successes are selling pre-made schlock, the kind of merchandise you can find in any thrift store, for less.

Etsy does have its fans. Vetr recently upgraded Etsy stock to a buy. But this is not a professional analyst firm. It’s a crowd-sourced investment platform, billing itself as the “Yelp” of the stock market. It is not the kind of comparison that gives an investor confidence – Yelp (NYSE:YELP) has lost half its value in 2015.

YELP stock chart

Source: Yelp stock price data by amigobulls.com

Of the six professional analysts still following the stock, five have it as a hold. Roth Capital, which most recently added coverage of the stock, gives it a sell rating.

Amazon (NASDAQ:AMZN) recently sent Etsy stock down 14% in one day on an announcement that it would create its own crafts market, revealing that it has been poaching Etsy merchants for months.

CEO Chad Dickerson, 42, is an Internet technology veteran, but most of his career before Etsy involved old technology, sites like Yahoo (NASDAQ:YHOO), Infoworld and Salon. And the site itself looks like something from early in the last decade, with its catalog metaphor and little ability to create either serendipity or cross-sales.

Etsy stock is selling at a garage sale price, but you are best advised to leave it on the table next to the chess set missing a few pawns and the well-loved stuffed bear with the last kid’s vomit on it. If you do own this stock, you can always hope a greater fool comes along to take it off your hands. Or you can go into the market and get what you can.

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Author's Disclosures & Disclaimers:
  • I am not an investment advisor, and my opinion should not be treated as investment advice.
  • I am not being compensated for this post (except possibly by Amigobulls).
  • I do not have any business relationship with the companies mentioned in this post.
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Comments on this article and ETSY stock

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jleemink
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so wrong.. Etsy culture is alive and strong. Just take some time to talk to regular people, and you'll realize how strong the brand is.. Just take some time to do some actual research on the site. And you'll see plenty of creative people and stuff dominating Etsy. This article is either ignorant, or straight up lies.
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