Etsy shares will remain under pressure even after 60% pullback this year, Needham says

Now is not the time to buy Etsy as a worsening retail environment continues to put pressure on the company’s business model, Needham says. “While shares have lagged and some near term volatility is arguably in the stock, in the near term, we view the discretionary nature of the ETSY model increasingly at risk,” wrote analyst Anna Andreeva as she downgraded the stock to a hold from a buy rating. Shares of Etsy have plummeted nearly 62% this year as the consumer discretionary sector comes under pressure amid rising inflation and fears of a looming recession. While Andreeva sees potential for Etsy in the future, she expects the company’s gross merchandise sales to suffer in the near term. “Given a primarily discretionary nature of the underlying demand and today’s pressures on the consumer both in the US and globally, we think core Etsy GMS could stay under pressure, while the new subs are also seeing negative demand trends, with profitability as a drag to consolidated results,” she said. Meanwhile, Etsy’s new buyer gross merchandise sales have declined for the last four quarters year-over-year and the number of repeat buyers dipped last quarter. Shares of Etsy were down 2% in premarket trading. — CNBC’s Michael Bloom contributed reporting