ETSY Stock Study (10-28-25)

Posted by Mark on January 28, 2025 at 07:19 | Last modified: October 28, 2025 14:10

I recently did a stock study on Etsy Inc. (ETSY, $75.56). Previous studies are here, here, and here.

M* writes:

     > Etsy operates a top-10 e-commerce marketplace operator in the
     > U.S. and the U.K., with sizable operations in Germany, France,
     > Australia, and Canada. The firm dominates an interesting niche,
     > connecting buyers and sellers through its online market to
     > exchange vintage and craft goods. With $12.4 billion in 2024
     > consolidated gross merchandise volume, Etsy has cemented itself
     > as one of the largest players in a quickly growing space,
     > generating revenue from listing fees, commissions on sold items,
     > advertising services, payment processing, and shipping labels.
     > As of the end of 2023, the firm connects about 95 million buyers
     > and 8 million sellers on its marketplace properties: Etsy and
     > Depop (clothing resale).

Since 2017 (previous years excluded due to negative EPS), the medium-size company has grown sales and earnings at annualized rates of 33.5% and 28.1%, respectively (’22 uses normalized EPS due to a $101.7 million non-recurrent impairment charge related to goodwill of its acquisitions of Depop and Elo7 leading to GAAP loss for the year). Lines are somewhat up, straight, and parallel despite EPS dip in ’18 and larger decline in ’23. Five- (10-) year EPS R^2 is 0.13 (0.59) and Value Line (VL) gives an Earnings Predictability score of 50.

Since 2017, PTPM is greater than peer and industry averages while increasing from 10.2% to 14.6% (’24) with a last-5-year mean (excluding ’22) of 16.7%. ROE slightly leads peer and industry averages while ranging (excluding ’22) from -42.8% in ’23 to 80.9% in ’21 with a last-5-year mean (excluding ’22) of 12.0%. Debt-to-Capital has risen above peer and industry averages by climbing from 15.0% in ’17 to 147% in ’24. Despite being remarkably high, VL gives a B grade for Financial Strength and writes in a previous report:

     > Although debt represented over 100% of capital at the end of 2022,
     > cash and short-term investments totaled $1.2 billion and the
     > company has only modest debt due over the next five years.
     > Additional funds can be sourced from the company’s $200 million
     > undrawn revolver and $29.1 million in long-term investments that
     > can be liquidated on short notice.

M* rates the company “Wide” for Economic Moat, gives a “Standard” rating for Capital Allocation, and a C grade for Financial Health (per BI website). Previous report indicates they are not concerned about debt:

     > With our forecast for just 0.8 times average net leverage over the next
     > five years (net debt/adjusted EBITDA), a paucity of near-term debt
     > maturities, and a highly cash generative mode… balance sheet risk
     > appears minimal for the marketplace operator. We believe that Etsy
     > should encounter no difficulties in funding its investments in headcount
     > and platform development with internally generated funds, while
     > retaining substantial flexibility to invest in brand marketing and
     > strategic acquisitions. With no principal maturities until 2026, we
     > view Etsy’s balance sheet health as strong, despite the firm carrying
     > $2.3 billion in gross debt as of the end of the first quarter of 2023.

Quick Ratio is 3.2 and Interest Coverage is 20.

With regard to sales:

• YF projects YOY 1.3% and 1.9% for ’25 and ’26, respectively (based on 28 analysts).
• Zacks projects YOY 1.5% and 2.3% for ’25 and ’26, respectively (9 analysts).
• VL projects 4.5% annualized growth from ’24-’29.
• CFRA projects 0.3% YOY contraction and 1.0% growth/year for ’25 and ’24-’26, respectively.
• M* provides a 2-year ACE of 2.7% per year and projects 11.0% per year from ’25-’29 in analyst note.

My 2.0% forecast is near bottom of the range.

With regard to EPS:

• MarketWatch projects 13.4% and 16.5% per year for ’24-’26 and ’24-’27, respectively (based on 35 analysts).
• Nasdaq.com projects 29.2% and 32.7% per year for ’25-’27 and ’25-’28 (7, 4, and 2 analysts for ’25, ’27, and ’28).
• Seeking Alpha projects 4-year annualized growth of 4.4%.
• Argus projects 5-year annualized growth of 20.0%.
• Finviz gives ACE 5-year annualized growth of 13.0% (13).
• LSEG gives LTG estimate of 10.3%.
• YF projects YOY 12.2% and 17.7% for ’25 and ’26, respectively (29).
• Zacks projects YOY 26.4% contraction and 72.8% growth for ’25 and ’26 (8) and 5-year growth of 3.5%/year.
• VL projects 17.4% annualized growth from ’24-’29.
• CFRA projects 1.0% YOY contraction and 5.0% growth per year for ’25 and ’24-’26, respectively.
• M* projects long-term annualized growth of 11.4%.

My 4.0% forecast is near bottom of the long-term-estimate range (mean of seven: 11.4%). Initial value is ’24 EPS of $2.35/share rather than 2025 Q2 EPS of $1.24 (annualized).

My Forecast High P/E is 32.0. Since 2017, high P/E ranges from 32.1 in ’17 to 96.5 in ’19 with a last-5-year mean of 63.0. The last-5-year-mean average P/E is 43.2. I am below the range.

My Forecast Low P/E is 14.0. Since 2017, low P/E ranges from 11.1 in ’20 to 52.3 in ’19 with a last-5-year mean of 23.4. I am forecasting toward bottom of the range [’20 and ’17 (13.8) are lower].

My Low Stock Price Forecast (LSPF) is $52.00. Default ($32.90) based on initial value given above is unreasonably low at 56.5% less than the previous close and 17.8% less than the 52-week low. My [arbitrary] projection is 31.2% less than previous close but 30% greater than the 52-week low.

These inputs land ETSY in the HOLD zone with a U/D ratio of 0.8. Total Annualized Return (TAR) is 4.4%.

PAR (using Forecast Average—not High—P/E) is -2.3%: unthinkable as an investment candidate. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR but even that is much less than I seek for a medium-size company.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on a tiny (anecdotal comparison only) sample of six studies (mine and two other outliers excluded), averages (lower of mean/median) for projected sales growth, EPS growth, Forecast High P/E, and Forecast Low P/E are 5.0%, 7.7%, 48.1, and 25.0, respectively. I am lower across the board. VL projects an average annual P/E of 29.0, which is less than MS (36.6) but greater than mine (23.0).

MS high / low EPS are $1.89/ $1.24 versus my $2.86/ $2.35 (per share). All six MS studies use $1.24, which I think is unreasonably low due to a losing quarter [only two since ’17 and both should be excluded due to non-recurrent items. This instance, 2025 Q1, includes non-cash foreign exchange loss and sale of Reverb] that also depresses high EPS. VL’s high EPS soars above both at $5.25/share.

MS LSPF of $31.00 is the default value. As described above in the Projected Low Price section, I think it unreasonably low.

I believe MOS is solid in this study because my inputs are near or below analyst/historical estimates/ranges. Mainly due to small sample size, I don’t put much weight on MS comparison.

With regard to valuation, PEG is 1.0 and 14 per Zacks and my projected P/E, respectively: extremely high on average (M* agrees at 3.4). Relative Value [(current P/E) / 5-year-mean average P/E] is also expensive at 1.4. Kim Butcher’s “quick and dirty DCF” has the stock undervalued by 52%, though. Unfortunately, the only thing I’ve found consistent about these valuation metrics is their inconsistency.

Per U/D, ETSY a BUY under $61/share. BI TAR criterion is met [91.5 / ((14.87 / 100 ) +1 ) ^ 5] ~ $46 with a forecast high price ~$92 (no dividend).

Full disclosure: I currently own ETSY shares.

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