- 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.
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.
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.