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Shares of Etsy Down Due to GMS Decline

Etsy (NASDAQ:ETSY) is a Brooklyn-based company that operates two-sided online marketplaces that connect buyers and sellers in the United States, Canada, and around the world. Shares of Etsy have jumped 7% month-over-month as of close on Wednesday, May 1, 2024. The e-commerce stock is still down nearly 14% so far in 2024. Is there reason for optimism at this stage? Let’s jump in.

This company released its first quarter (Q1) fiscal 2024 earnings on Wednesday, May 1. It reported total revenues of $645 million – up 0.8% from $640 million in the first quarter of fiscal 2023. Meanwhile, Gross Merchandise Sales (GMS) fell 3.7% year-over-year to $2.98 billion. According to the quarterly report, Etsy ran into headwinds to consolidate GMS. Some of those headwinds included a challenging macroeconomic environment that negatively impacted discretionary consumer spending. Moreover, GMS was also impacted to a lesser extent by the divestiture of Elo7 in 2023.

EBITDA stands for earnings before interest, taxes, depreciation, and amortization. This measure aims to give a clearer picture of a company’s profitability. Etsy reported a non-GAAP adjusted EBITDA of $167 million in Q1 2024. That was down 1.4% compared to Q1 2023. Meanwhile, its adjusted EBITDA margin fell 60 basis points to 26.0%.

Shares of Etsy currently possess a price-to-earnings ratio of 30. That puts this retail e-commerce stock in favourable value territory compared to its industry peers at the time of this writing. Economic growth in the United States has remained strong. An improved macroeconomic climate could provide a boost to Etsy for the remainder of 2024 as earnings are still forecast to grow at a promising rate.