What Happened: Shares of online marketplace Etsy (NASDAQ:ETSY) fell 17.3% in the pre-market session after the company reported first quarter results. Its revenue growth regrettably slowed as its gross merchandise sales and active buyers fell short of analysts' estimates. That was slightly offset by the company's better-than-expected take rate, showing it charged higher commissions to offset its worse-than-expected demand.
Etsy's management team noted that Q1 was a challenging environment for consumer discretionary products, which was a headwind to its growth. The company provided ambiguous guidance for the full year as well, spooking investors.
Overall, this was a tough quarter for Etsy.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Etsy? Find out by reading the original article on StockStory, it's free.
What is the market telling us: Etsy's shares are quite volatile and over the last year have had 16 moves greater than 5%. But moves this big are very rare even for Etsy and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the company gained 10.9% after CNBC reported that Elliott Investment Management built a 13% in the company. This move is notable given Elliott's track record for activist campaigns, often bringing about significant changes in targeted companies, focusing on aspects like improving asset monetization, expense efficiency, and stock buybacks.
Following the report, Etsy announced the appointment of Marc Steinberg, Partner at Elliott Investment, to its Board, effective February 5, 2024. Marc Steinberg oversees public and private equity investments across various sectors, including technology, media, and telecommunications. He serves on the boards of directors of Pinterest (NYSE:PINS), Nielsen Holdings (NYSE:NLSN), Syneos Health (NASDAQ:SYNH), and Cubic (NYSE:CUB). Steinberg added, "We became a sizable investor in Etsy and I am joining its board because I believe there is an opportunity for significant value creation."
Recall that late in 2023, Elliott built a sizable position in Consumer Internet company Pinterest (NYSE:PINS) as well, with Steinberg joining the Board there shortly thereafter.
Etsy is down 26.2% since the beginning of the year, and at $59.85 per share it is trading 41.1% below its 52-week high of $101.65 from July 2023. Investors who bought $1,000 worth of Etsy's shares 5 years ago would now be looking at an investment worth $878.83.