Maetri
Community Member

Etsy has caused the Downturn says NASDAQ- Downgrades Stock

Etsy Inc (NASDAQ: ETSY) shares have yet to rebound after plunging on October’s earnings. One team of analysts isn’t hopeful for a recovery.

The Rating

Morgan Stanley analysts Lauren Cassel and Brian Nowak downgraded Etsy to Underweight and cut their price target from $52 to $38.

The Thesis

The analysts expect two major headwinds to hinder Etsy’s performance.

First, new state sales taxes could increase cart abandonment and decrease conversion. Second, Etsy has shifted its ad focus from buying Product Listing Ads to driving seller marketing-dollar investments — a strategy with longer payback time and lower efficiency.

“In addition, going forward we believe the market may be under appreciating the potential headwind from sellers pulling marketing spend as they are unable to choose where those dollars are being spent, resulting in lower ROI and conversion rates,” Cassel and Nowak wrote in a report.

These headwinds may be dulled by “free” shipping, which should lead sellers to bake shipping costs into prices and thereby inflate GMS. The analysts estimate a related 6% swell in the metric.

“Sales tax and Etsy ad headwinds could more than offset free shipping benefits,” they wrote. “A shorter holiday calendar and algorithm changes are two other 4Q risks.”

By their estimates, Etsy faces a tough year ahead.

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JDCreativeHands
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

I understand what the experts are saying but I do think there are some holes in their analysis.

Cart abandonment has long been an issue since the rise of e-commerce.  This has been studied ad nauseum by many.  The usual cause is cited is the shipping cost.  The addition now of tax which by the way states have always required consumers to pay but most didn't and now they are forced to pay taxes for so far 35 states.  5 will never pay taxes and 10 are undecided.  However the tax situation has nothing to do with Etsy as they were not the instigators.  They are simply complying with state regulations as required.

Etsy has merely shifted the paying of the Google ads to the seller.  Before Etsy did buy but the number available meant few of us got any real use out of the ads.  The ads themselves sparked a great deal of frustration of which I initially agreed but after a bit more careful selecting on my part I do use the ads.  I think time is a factor here.  Sellers have to first analyze what happens in light of the changes, make changes to pricing and then allow the system 30 days to actually work.  I must admit I did not follow what Etsy said about the 30 days but they were right.  Once I had more time the ads began to work better for me.  Also many have reported an uptick in success with the ads.  Is the writers of the article focusing on the forums for information?  That makes for skewed results.  

As to shipping included a term I prefer, this tool has been used for decades.  It is nothing new.  Many businesses use this tool as a way to present one price point to the buyer.  After all we pay shipping for items bought in physical stores yet we don't complain about it.  The most important point is not whether the item is free shipping or has a shipping cost but the value the buyer places on the item.  The more value the buyer assesses the item at the more likely to purchase regardless of free shipping or separate shipping cost.  Here I lies the backlash being seen in some areas.  Buyers are returning to physical stores for purchase for two reasons, 1) speed of getting the item and 2) paying a shipping cost.  Shipping included may be one way to get a buyer to still consider e-commerce buying.

Etsy has had their share of ups and downs.  I would not be surprised if a shorter season does affect them adversely in the short run, but in the long run, such changes can predict a higher return.  

Two to three years ago this site faced either being bought or being closed.  That was a very tough time but Etsy survived. 

The question may be more what outside forces will affect Etsy rather than internal changes.  

As to the downgrading of stock, of course, I would expect it.  I would also expect it to change again and again.  Unless the stock is depressed for years rather than months I don't put much stock in limited analysis of any company.  

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Sweetpea2Daisy
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

"Etsy has merely shifted the paying of the Google ads to the seller"

Merely???

 

64 Likes
MouseGarden
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

"Etsy has merely shifted the paying of the Google ads to the seller. "

It's more complicated than that.  Some shops sell things that have a lot of general internet competition for keywords, and there is no way to choose which keywords to advertise.  Suddenly they are bidding against corporations and large importers.

Plus if they were advertising on Google already, then suddenly their Etsy ads are competing with their website ads.

Etsy basically wants sellers to pay a minimum amount for advertising.  I had to stop advertising because I can't set cpc, and I can't afford some mystery number that I don't know in advance because Etsy says it will "even out" but it doesn't always.  I've had keywords clicked in the past  because the algorithm chooses one word to advertise that is actually the name of a knitting stitch, but taken out of context it's an object too.  Without control of cpc, I would pay top dollar for that mistake.

Plus really it is a conflict of interest for Etsy to be setting the cpc.  Of course they want the maximum bid, but if they have control of both bidding parties, then it can be bid up for no reason other than two shops in the same field are buying ads from Etsy.

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OneEyeCatStudio
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

 

It's always sunny in Cleveland!

22 Likes
EpiclesisConsulting
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

I think I am more inclined to believe the analysis of the stock by a stock analyst with no more specific interest in Etsy than in any other stock on the exchange than that of a seller (with or without a background in stock analysis) who naturally, as a seller, has such an interest.

Trish O'Connor
Owner, Epiclesis Consulting LLC

80 Likes
BlueBirdPrettyGifts
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

@JDCreativeHands You wrote, ""Etsy has merely shifted the paying of the Google ads to the seller. " I would not describe this MAJOR shift in advertising costs onto the sellers' shoulders - who are already frustrated by everything they need to pay for in order to increase visibility of their items - as something that is a "mere" change. 

I agree with Trish, these stock analysts have no vested interest in downgrading the Etsy stock or prospects. They "merely" use their good judgement and expertise in signaling that "something wicked this way comes." Have you seen that movie? It is a suspense story, and nobody knows what exactly is going to happen - but they are all shivering in fear. 

I think that website like Prestrostore.com where I have my standalone, which only charge a monthly flat free of 29.95 and submit your listings to G Shopping for FREE, sound more and more like the right alternative. 

BB

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Phyndz
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

 

self-deleted

 

2 Likes
Miriboheme
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

merely.

i can't advertise anymore because the money goes straight down the hole with NO conversions to sales. NONE. 

a BIG BIG BIG change for many of us.


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EELT
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

 
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BezInnovations
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

Well well well. The market is agreeing with what sellers have been saying. Seems like those sitting in ivory towers, dumping on us sellers might not be as smart as everyone thought. Too bad the prior owner of Etsy wouldn't restart a new Etsy. I think seller would flock to it in a heartbeat!

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MemoryLnAntiques
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

When you get a chance do a search of Silverman's job history. He changes jobs frequently never staying in one place very long. He had a couple different titles with Ebay, but they too did not last.

I can see the handwriting on the wall, his ego got the better of him once again, he pushed too far thinking he was the untouchable golden boy, but in 2 years of his being at the Etsy helm it has gotten progressively worse, because he forgot the golden rule, "don't bite the hand that feeds you" . He has pushed the sellers to the point they just aren't "saying oh well", and following whatever crap he throws at us like a flock of sheep. This time we said no. It was about time!

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MemoryLnAntiques
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

When you get a chance do a search of Silvermans job history. He changes jobs frequently never staying in one place very long. He had a couple different titles with Ebay, but they too did not last.

I can see the handwriting on the wall, his ego got the better of him once again, he pushed too far thinking he was the untouchable golden boy, but in 2 years of his being at the Etsy helm it has gotten progressively worse, because he forgot the golden rule, "don't bite the hand that feeds you" . He has pushed the sellers to the point they just aren't "saying oh well", and following whatever crap he throws at us like a flock of sheep. This time we said no. It was about time!

7 Likes
honeycup
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

Most CEO's are about ego. I doubt any of the new players are that different.

1 Like
LilyWhitepad
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

@honeycup: Many CEOs have sociopathic tendencies.

4 Likes
JJJewellerySupplies
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

"the market may be under appreciating the potential headwind from sellers pulling marketing spend"

Yep, that would be about right.  No seller in their right mind will continue to pour funds down that black hole!!

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SpottedOctopusShop
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

The truth is sellers don’t trust the management team that talks about churn and how replaceable sellers are. It’s also insulting to be talked about like a farm animal being motivated by sticks and carrots. 

116 Likes
CarolsEpiphany
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

SpottedOctopusShop, spot on.  No true words were ever spoken.  You nailed the way I feel.

10 Likes
EcoHipCustomDesigns
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

@SpottedOctopusShop You describe my feelings perfectly. I can't have faith in a management team that so openly describes us sellers like a herd of farm animals to be managed. 

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LilyWhitepad
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

@Octopus -- I once worked for a company that churned through staff (which required up to six weeks of training before hitting the floor) because jobs were scarce and the owners thought personnel supply was endless. Then times changed, defections rose, and suddenly the high cost of turnover hit them. Relying on churn is never a long-term solution.

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euromercantile
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

My thoughts exactly... Blah...

 

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FenderMinerals
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

So do you want to provide a link to your source?  That would be helpful since NASDAQ does not rate stocks.

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HandmadeCollectionz
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock


@FenderMinerals wrote:

So do you want to provide a link to your source?  That would be helpful since NASDAQ does not rate stocks.


I just found this:  https://www.marketwatch.com/investing/stock/etsy

 

4 Likes
FenderMinerals
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

That is just standard issue found at any financial site.  I just found it interesting that we are getting an earful with a bad premise - that the NASDAQ did the rating

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SpottedOctopusShop
Community Member

Re: Etsy has caused the Downturn says NASDAQ- Downgrades Stock

Do a google search. 

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