Shares of Etsy Inc. closed Friday's trading session with a significant gain of 8.5%, finishing at $52.18. The rally extended a two-day advance, driven by two primary catalysts: the company's strategic decision to divest its Depop fashion resale platform and a positive revision in analyst sentiment from a major financial institution.
Strategic Shift and Financial Update
The e-commerce marketplace announced an agreement to sell Depop to eBay for approximately $1.2 billion in cash, with the transaction expected to close in the second quarter of 2026. This move continues Etsy's strategic refocus on its core handmade and vintage marketplace, following the sale of its musical gear platform, Reverb, last year. Etsy originally acquired Depop in 2021 for $1.63 billion.
Concurrently, the company released its fourth-quarter financial results, which presented a mixed picture. Revenue for the period reached $881.6 million, narrowly missing the Wall Street consensus estimate of $884.9 million. Gross merchandise sales (GMS) on the Etsy marketplace itself declined by 1% year-over-year on a currency-neutral basis, totaling $3.29 billion.
Forward Guidance and Analyst Action
Management's outlook for the current quarter tempered some investor enthusiasm. Etsy forecast first-quarter GMS in a range of $2.38 billion to $2.43 billion, representing a decline from the $2.8 billion reported in the first quarter of the previous year. For the full 2026 year, the company anticipates only slight GMS growth. Chief Financial Officer Lanny Baker indicated that the company's planning assumes consumer spending remains "stable" at current levels.
In response to these developments, Barclays upgraded Etsy's stock rating to "Overweight" from "Equal Weight" and raised its price target to $72. The analysts cited the Depop sale and signs of stabilization in the core marketplace as potential inflection points, while also acknowledging ongoing challenges from competitive pressures and macroeconomic uncertainty.
Market Context and Competitive Landscape
The rally in Etsy shares occurred amidst a broader reassessment of consumer discretionary stocks. Some tariff-sensitive names found support after a U.S. Supreme Court ruling on tariffs, though the longer-term implications remain unclear. For Etsy, investors are balancing the prospect of improved profit margins following the divestiture against the softer near-term sales trajectory.
The Depop sale also carries competitive weight. eBay gains a resale platform popular with Gen Z consumers—a demographic Etsy once highlighted as a key growth vector. The speed and effectiveness of eBay's integration of Depop may influence how the market views Etsy's renewed "back to basics" strategy focusing on its original marketplace.
Management Focus and Challenges
In prepared remarks, Chief Executive Kruti Patel Goyal emphasized the company's ongoing initiatives to enhance search, discovery, and marketing to drive user engagement and relevance. However, the company continues to face headwinds, with metrics showing a year-over-year decline in both active buyers and sellers on the platform.
Risks to the outlook persist. The company's first-quarter GMS guidance implies a notable year-over-year contraction. Furthermore, continued softness in discretionary consumer spending could push results toward the lower end of the provided range, especially if the trend of slowing repeat purchases persists.
Looking Ahead
Attention now turns to whether Etsy can sustain its recent share price gains as the market digests the details of the Depop transaction and the company's strategic filings. Analysts are scrutinizing recent disclosures for further clues on capital allocation and operational strategy.
Broader macroeconomic data will also be crucial for consumer-facing stocks like Etsy. The next Personal Consumption Expenditures (PCE) inflation update from the Bureau of Economic Analysis, scheduled for March 13, will be a key input for interest rate expectations and, by extension, the valuation of discretionary sectors.
