Etsy Crafts a Solid Fourth Quarter, but Macroeconomic Headwinds Linger

It would be hard to identify a marketplace with a heavier discretionary skew than Etsy ETSY, which makes the firm’s sequential acceleration in core marketplace platform sales growth relative to before the pandemic (to 145% in the fourth quarter from 134% in the third) impressive. The craft marketplace isn’t through the woods yet, with sales slowing sharply in February as macroeconomic pressures remain pronounced. However, we remain confident in our long-term forecast for nearly $45 billion in 2032 gross merchandise volume and low 30s adjusted EBITDA margin for the marketplace operator. After digesting fourth-quarter results, we don’t expect to change our $170 fair value estimate. Our forecast for $3.04 in diluted EPS in 2023 is also intact.

Etsy reported solid fourth-quarter results, with $807 million in net revenue edging our $774 million forecast, though $0.76 in diluted EPS missed our $0.86 estimate, attributable exclusively to share-based compensation. The firm has seen spending per active buyer—perhaps the most important sales driver moving forward—grow at an 8.2% CAGR relative to before the pandemic, and new buyer spending patterns seem to reflect positive momentum. With Etsy continuing to invest heavily in search optimization, platform trust, and unprompted awareness, we see a route to nearly $300 in platform spending per buyer in a decade, implying roughly 5% real growth per year.

In another positive, Etsy now sees 22 million active male buyers, representing just under one fourth of its active user base. The ability to better cater to an extra half of the global population should meaningfully expand the firm’s addressable market, even if those users’ visits skew toward special occasions and gifting. With 89.4 million active buyers and 5.4 million category-interested sellers on the platform at year-end, Etsy’s competitive position is nearly unassailable in its core markets, in our view, and underpins our wide moat rating.