Shares of Etsy Inc (NASDAQ: ETSY) have lost nearly 45% this year and the probability of a near-term recovery, as per an Evercore ISI analyst, is rather slim.
Why is she dovish on the Etsy stock?
Etsy is trading down on Wednesday after Shweta Khajuria added the eCommerce company to her list of “tactical underperformers” and warned of a further downside in this stock to $115.
Her dovish view is based on sinking consumer confidence ahead of a possible recession. Roughly half of the participants in Evercore’s recent survey had “somewhat-to-very pessimistic” outlook on the U.S. economy.
That signals an imminent slowdown in spending and warrants “near-term caution” as it relates to buying Etsy stock on the weakness, the analyst added.
The trade down is already evident in people who shop at Etsy. Weighted average spend that stood at about a $100 in June has come down to $60 in November.
Long term strength remains intact
According to the U.S. Census Bureau, retail sales were up 1.3% in October. Still, Evercore’s survey indicates that people are spending less frequently on Etsy.
Etsy customers that make purchases at least 2-3 times a month decreased from 25% in June to 16% in the current survey. Meanwhile, Etsy customers that make purchases once every 6 months or even less frequently tick up 16%.
Nonetheless, Khajuria remains positive on the Etsy stock for the long term, especially after it, earlier this month, reported market-beating results for its fiscal third quarter and issued upbeat guidance for the future.
But that upside will take some time to unlock, according to the Evercore ISI analyst.