Etsy stock pops on Depop deal despite disappointing revenue, merchandise sales

Etsy's stock experienced a notable increase on Thursday following the announcement of its decision to sell the fashion resale app Depop to eBay for approximately $1.2 billion in cash. This strategic move comes as the online marketplace also revealed its fourth-quarter earnings, which showed a mix of results. In terms of performance, Etsy reported a 3.8% year-over-year decline in gross merchandise sales, totaling $3.59 billion, which fell short of analyst expectations set at $3.6 billion according to FactSet. The company cited its sale of the musical instrument marketplace Reverb, finalized last June, as a contributing factor to this decrease. Despite these disappointing figures, the announcement regarding Depop overshadowed the earnings report. Etsy's CEO, Kruti Patel Goyal, expressed optimism about the sale, stating that it would enable the company to concentrate on its primary marketplace. eBay, on its part, highlighted that acquiring Depop aligns with its growth strategy and enhances its presence in the rapidly expanding fashion sector. Following this news, eBay's stock also saw an uptick on the same day. In the fourth quarter, Etsy's net income dropped by 14.8% compared to the previous year, amounting to $110.7 million, or 92 cents per share, down from $129.9 million, or $1.03 per share a year earlier. The company, renowned for its curated selection of handcrafted and artisanal products, is intensifying its marketing efforts to attract more consumers in the U.S. However, it faces increasing competition in the online retail space alongside a challenging economic environment. In its annual filing released on Thursday, Etsy noted that it is experiencing pressures from a decline in consumer discretionary spending and shifting buyer behavior. While the number of active sellers grew by 7.7% year-over-year to reach 8.76 million, surpassing the estimated 8.5 million, the count of active buyers dipped by 2% to 93.54 million, slightly above Wall Street's forecast of 93.1 million. Looking ahead to the first quarter, Etsy has projected gross merchandise sales between $2.38 billion and $2.43 billion, a decrease from $2.8 billion in the same quarter last year, with analysts predicting $2.68 billion in gross merchandise sales.