News

Etsy (NASDAQ: ETSY) issued yet another disappointing earnings report on Wednesday. Investors have been hoping for a turnaround after several quarters of flat growth, but Etsy's first-quarter earnings report came up short.

The company reported another quarter of declining gross merchandise sales (GMS), the total dollar value of goods sold on the platform, and its guidance did little to stoke any expectations of a recovery.

Not surprisingly, Wall Street generally gave the report a thumbs-down, and the stock finished down 15% last Thursday. One analyst was particularly frustrated with the results.

Loop Capital cuts Etsy to a sell

Loop cut its rating on Etsy to a sell, noting a continuing decline in GMS without a clear strategy to reverse that slide, and also noted the earnings miss. The firm was also skeptical that Etsy would fulfill its guidance in the second half of the year, calling for a modest acceleration in GMS growth.

Loop's price target of $50 reflects a 17% downside in the stock.

Is it time to sell Etsy?

It's hard to find a silver lining for Etsy these days. The company seems unable to find a way to grow even as it is more than two years removed from the end of the pandemic. Management has also made questionable decisions such as overspending on Elo7, which it has since sold, and Depop, showing it overestimated growth in those businesses and assumed the pandemic tailwinds would persist.

Etsy still has a unique platform in e-commerce, but it's possible that the brand has exhausted its addressable customer base after the pandemic brought so much attention to e-commerce sites like Etsy. Selling the stock is certainly justifiable after its long series of weak earnings reports, especially without a clear path to recovery.

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Jeremy Bowman has positions in Etsy. The Motley Fool has positions in and recommends Etsy. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.