What Happened?
Shares of online marketplace Etsy (NASDAQ: ETSY) fell 8.8% in the afternoon session after its third-quarter earnings report revealed a drop in active buyers and a weak forecast for the fourth quarter. The company posted revenue of $678 million and GAAP earnings per share of $0.63, both surpassing expectations. However, investors focused on troubling trends, as the number of active buyers fell 3.7% year-over-year to 93.16 million. The key driver for the stock's decline was the company's disappointing guidance. Etsy projected an EBITDA margin of 24% for its fourth quarter, well below analysts’ expectations of 27%. This weaker outlook on future profitability appeared to overshadow the third-quarter beat, sending shares lower as investors weighed the company's near-term challenges.
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? Access our full analysis report here.
What Is The Market Telling Us
Etsy’s shares are very volatile and have had 27 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 2 days ago when the stock gained 2.6% on the news that optimism surged over a potential trade truce between the U.S. and China. Reports of progress in trade negotiations ahead of a scheduled meeting between the two nations' presidents fueled investor confidence. An agreement would likely ease trade tensions and reduce or remove tariffs that have created economic uncertainty and higher costs for many multinational corporations. Also, optimism improved on expectations that the Federal Reserve will cut interest rates later in the week, especially after recent data showed inflation wasn't heating up as much as expected. Simply put, good news on trade, and the promise of lower borrowing costs created a powerful rally.
Etsy is up 28.9% since the beginning of the year, but at $68.48 per share, it is still trading 9.4% below its 52-week high of $75.56 from October 2025. Investors who bought $1,000 worth of Etsy’s shares 5 years ago would now be looking at an investment worth $517.14.
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