Etsy Crafts a Solid Fourth Quarter, but Macroeconomic Headwinds Linger; Shares Still Cheap

It would be hard to identify a marketplace with a heavier discretionary skew than Etsy, which makes the firm's sequential acceleration in core marketplace platform sales growth relative to before the pandemic (to 145% in the fourth quarter from 134% in the third) impressive. The craft marketplace isn't through the woods yet, with sales slowing sharply in February as macroeconomic pressures remain pronounced. However, we remain confident in our long-term forecast for nearly $45 billion in 2032 gross merchandise volume and low 30s adjusted EBITDA margin for the marketplace operator. After digesting fourth-quarter results, we don't expect to change our $170 fair value estimate. Our forecast for $3.04 in diluted EPS in 2023 is also intact.