What Happened:
Shares of online marketplace Etsy (NASDAQ:ETSY) fell 5.6% in the morning session after stocks experienced a second consecutive day of decline, accompanied by an increase in yields. The 10-year Treasury yield rose past the 4% mark for a brief moment. The 2-year yield rose to 4.38%. This may be a sign that there is a hint of uncertainty and questions about whether the broader market is positioned too optimistically or whether the market has "gotten ahead of itself". Other than this, there is nothing specific to directly explain the downward move.
As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. No wonder so many in the investment community are optimistic about 2024. We at StockStory are not macro prognosticators. Instead, we think there are opportunities to pick market-beating stocks in any macro backdrop. We remain steadfast in our view that it's best to own high-quality companies with margins of safety over the long term in any market.
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, it's free.
What is the market telling us:
Etsy's shares are very volatile and over the last year have had 18 moves greater than 5%. In context of that, today's move is indicating 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 16 days ago, when the company gained 5.9% as stock rebounded following a steep sell-off in the previous week. Etsy announced on December 13th, 2023, that it is cutting 11% of its workforce, or approximately 225 employees, as the company looks to restructure its business and streamline costs against a "very challenging" macro and competitive environment. This move marks a shift from the negative sentiment in the previous week, and there haven't been any further updates on the situation.
At $77.53 per share, Etsy is trading 47.7% below its 52-week high of $148.20 from February 2023. Investors who bought $1,000 worth of Etsy's shares 5 years ago would now be looking at an investment worth $1,684.
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