ETSY, INC (ETSY): what the price assumes

In the published model solve dated 2026-Q2, anchored at $76.50, ETSY, INC (ETSY) is priced for +15.9% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-09-07 · Exported: 2026-09-09 · Source: https://boothcheck.com/report/ETSY

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 10: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 8.7% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

The price is supported by earnings-power value, while relative-multiple lands below the price. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Earnings Families that call it expensive: Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.7%); the inversion above states its own rate.

Per-Model Detail (n=5)

Economic-Unit Decomposition (Sum Of The Parts)

Only one reportable economic unit is present in the current topology source. Consolidated operating lenses remain available, but there is no multi-unit decomposition.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• Sellers are handing over a bigger slice of every sale: gross merchandise sales fell about 5% in 2025 to 11,916.9 million dollars while revenue came in at 2,884 million dollars, which on the company's own definition of take rate as revenue divided by merchandise sales works out near a quarter of everything transacted.
• Depop is on its way out the door: on February 15, 2026 Etsy agreed to sell the fashion resale marketplace to EBAY, a deal the 10-Q values at 1.2 billion dollars and expects to close by the end of the third quarter of 2026.
• Second-quarter results are due August 5, 2026, and the number that matters is whether core marketplace merchandise sales keep growing after the first quarter turned positive.

Bull Case

The oddest line on Etsy's balance sheet is the bottom one. Total stockholders' deficit stood at 1,136.9 million dollars negative at the end of March 2026, against total assets of 2,681.1 million dollars and total liabilities of 3,817.9 million dollars. On most companies that pattern signals something has gone badly wrong. Here it is the accounting residue of a decade of buybacks: the company has retired so much of its own stock that the equity account went through zero and kept going. The share count has fallen about 4.7% a year over the past four years. Book value stopped being a meaningful description of this business some time ago.

What is left is a toll booth. Etsy does not own inventory, does not warehouse anything, and does not ship. It runs a marketplace and charges for access to it. In 2025 the platforms moved 11,916.9 million dollars of merchandise and the company kept 2,884 million dollars of that as revenue, which on the 10-K's own definition ("Revenue take rate is revenue divided by GMS") is roughly a quarter of everything transacted. That number has been climbing, and it climbed in a year when the merchandise itself did not: "GMS decreased $670.1 million to $11,916.9 million in 2025 compared to $12,587.0 million in 2024." Revenue still rose. A business that can raise its cut faster than its volume falls has pricing power, and pricing power in a marketplace is the whole asset.

The first quarter of 2026 suggests the volume side may have stopped fighting it. The 10-Q attributes the quarter's revenue increase to "a $9.7 million increase in Etsy transaction fee revenue, both driven by an increase in Etsy marketplace GMS", alongside higher payments revenue, offset by the loss of Reverb, which was sold on June 2, 2025. Core marketplace merchandise sales growing again, with the take rate already where it is, is the combination the bull case has been waiting on.

Then there is the Depop decision, which is the most interesting capital-allocation move Etsy has made in years. On February 15, 2026 the company agreed to sell the whole of Depop Limited to EBAY, a transaction the 10-Q puts at 1.2 billion dollars, "in an effort to focus on driving growth in the core" marketplace. Depop was the growing piece of the portfolio and it was also losing money; the segment's results, now reported as discontinued, took 35.0 million dollars off the quarter. Selling a fast-growing loss-maker to a competitor for over a billion is not the reflex of a management team defending a story. It is the reflex of one that has decided which business it is actually in.

Against the cohort, the economics hold up better than the shrinking-marketplace narrative implies. EBAY converts 19.6% of revenue into operating profit on 11.6 billion dollars of revenue; W runs 1.0% on a comparable revenue base; CHWY manages 2.4%; RVLV, at a much smaller scale, gets 5.9%. Etsy's trailing operating margin near 10.6% sits between those extremes despite being a fraction of their size, which is what happens when you never touch the goods.

Bear Case

Handmade and vintage goods bought online is a discretionary category, and discretionary categories are cyclical whether or not the platform selling them is fashionable. The cycle turned against Etsy and has not turned back at the merchandise level: "GMS decreased $670.1 million to $11,916.9 million in 2025 compared to $12,587.0 million in 2024." Less stuff moved across the platforms than the year before, and revenue held up only because the company took a larger share of each transaction.

That mechanism has a ceiling and the seller pays for it. Every increment of take rate is money out of a small business's margin, and the 10-K is candid that sellers have somewhere else to go. They can sell through "local consignment and vintage stores, as well as other venues or marketplaces, or through social networks and agentic experiences", or wholesale directly to retailers who found them on Etsy in the first place. A marketplace whose growth comes from charging its supply side more is one bad quarter of seller attrition away from losing both halves of the equation at once.

Geography compounds it. Three quarters of merchandise volume comes from US buyers, and the 10-K names the exposure directly: "There is considerable uncertainty regarding the evolving tariff landscape, how recent changes to de minimis exemptions may play out, and the impact higher tariffs might have on consumer demand and discretionary wallet share." A cross-border marketplace built on small parcels of low-value goods is precisely the shape of trade that de minimis rules were protecting.

The compensation arithmetic deserves attention because it changes the picture more than any other single item. The business generated 711.4 million dollars of free cash flow, and roughly a third of that went straight back out as stock-based pay. Capitalise the reported figure at the cost of equity and the stock trades about 65% above where the earnings-power methods centre. Do the same after subtracting stock compensation and that gap widens considerably. The buybacks that pushed book equity below zero are, in meaningful part, mopping up shares the company issues to its own staff.

Which leaves the bar the price sets. Roughly 34.7 times trailing operating income is the top of this peer cohort, well beyond its upper quartile, and inverting it asks company-wide operating growth of about 29.1% a year sustained across a five-year stage. Only about 24% of comparable fast growers have held a pace like that for that long. EBAY, the larger and more profitable marketplace, is not being asked for anything close to it. If the take rate stops climbing before merchandise volume durably recovers, the whole structure rests on a multiple that no family of valuation method currently reaches.

Valuation

Start with what is missing. Etsy carries negative book equity, so every method that values a company off its assets simply does not run here. So does anything anchored on retained earnings. What is left are the cash-flow lenses and the multiple comparisons, and neither reaches today's level.

The earnings-power methods, which capitalise the cash the business actually produces, centre about 65% below where the stock trades. The peer-multiple lenses sit further out still, with the price roughly 92% above where that family centres. Neither family reaches. The most informative pair inside them is the spread between capitalising free cash flow as reported and capitalising it after deducting stock-based compensation: same business, same discount rate, and the second lands at a fraction of the first. That difference is the honest measure of how much of this company's cash generation belongs to shareholders rather than to employees.

Inverted, the current level implies company-wide operating growth of about 29.1% a year over a five-year stage. That is a demanding requirement, and the history is not encouraging: only about 24% of companies growing at comparable rates sustained it that long. The rate itself is not beyond what Etsy has recently delivered. The duration is the stretch.

The multiple frames the same point differently. About 34.7 times trailing operating income puts this at the very top of its peer group, well beyond the upper quartile, for a marketplace whose merchandise volume fell in 2025 and whose revenue mix runs roughly 70% marketplace fees and 30% seller services. EBAY, running a 19.6% operating margin on 11.6 billion dollars of revenue growing 12.5% a year, is the closest thing to a direct comparison in the set and is not valued anywhere near this aggressively.

The balance sheet is unusual rather than fragile. Borrowings of 3,075.8 million dollars sit mostly in convertible notes, against 1,425.8 million dollars of liquid holdings, leaving net borrowings around 6 times operating profit. Those are convertible instruments, which means the downside protection they offer the lender is the right to become an equity holder, and the risk to the current owner is dilution rather than default. The pending 1.2 billion dollar Depop disposal would change that arithmetic materially when it closes. Until then, the leverage is real but the maturity wall is not the pressing question; the take rate is.

Catalysts

The clearest dated item on the calendar has already half-resolved. Etsy signed the agreement to sell Depop to eBay on February 15, 2026, with closing expected by the end of the third quarter of 2026 subject to regulatory approval. About ten days ago the UK competition regulator cleared the transaction, which removes the most obvious obstacle to that timetable. Proceeds of 1.2 billion dollars landing on a balance sheet that currently shows a stockholders' deficit is a meaningful change in what management can do next.

Second-quarter results are scheduled for August 5, 2026. The setup is better than the last several prints: first-quarter income from continuing operations came in at 104.7 million dollars against a loss of 35.1 million dollars in the same quarter of 2025, and the improvement was driven by core marketplace merchandise sales growing rather than by another turn of the take-rate screw.

The sell side has moved quickly in the past two weeks and in one direction. Raymond James lifted its target to 92 dollars from 75, expecting strong merchandise-sales delivery. Truist went to 90 dollars from 85, citing second-quarter sales tracking ahead of consensus. Bank of America moved to 90 dollars from 75 while keeping a Neutral rating. Three revisions in a fortnight, all upward, all clustered just above where the shares trade, is a signal about second-quarter expectations more than about the twelve months after it.

Peer Cohorts (Per Segment, With Filing Citations)

Etsy marketplace (single reportable segment) (reported)

• EBAY (eBay Inc.)
• FY2025 10-K: …further details about our equity investments. 92 Table of Contents eBay Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Note 8 - Supplemental Consolidated Financial Information Contract Balances Timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable…
• FY2025 10-K: …to the $5.0 billion previously authorized in 2024. In February 2026, we entered into a definitive agreement to acquire Depop, Inc., a leading C2C fashion marketplace focused on recommerce with a highly-engaged Gen Z and Millennial customer base, for approximately $1.2 billion in cash, subject to certain purchase…
• MELI (MercadoLibre Inc)
• FY2025 10-K: …is the main performance indicator of our Commerce revenue line. Management believes that monitoring the Commerce business growth through a standalone metric enables us to better understand user behavior over each period and make strategic decisions to improve the Commerce business. Unique active buyers is defined as…
• FY2025 10-K: …Filer ☐ Non-Accelerated Filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of…
• W (WAYFAIR INC.)
• FY2025 10-K: …and reportable segments, including customer service and merchant fees and selling, operations, technology, general and administrative expenses based on the usage and relative contribution provided to the segments. It excludes from the allocations certain operating expense lines, including depreciation and…
• FY2025 10-K: …long-lived assets attributable to Wayfair's reportable segments reconciled to the consolidated amounts: December 31, 2025 December 31, 2024 (in millions) Geographic long-lived assets: U.S. $ 695 $ 789 International 273 279 Total reportable segment long-lived assets 968 1,068 Plus: reconciling corporate long-lived…
• RVLV (REVOLVE GROUP, INC.)
• FY2025 10-K: FWRD, each offering apparel, shoes, accessories and beauty products available for sale to customers through their respective websites. Our reportable segments have been identified based on how our chief operating decision makers manage our business, make operating decisions, and evaluate operating performance. Our…
• FY2025 10-K: …financial statements. We have exposure to losses from fraudulent credit card charges. We record losses when incurred related to these fraudulent charges as amounts have historically been insignificant. See Note 12, Segment Information , for disaggregation of net sales by reportable segment, geographic area and major…
• CHWY (CHEWY, INC.)
• FY2025 10-K: …to these transactions and revenue is recognized on a gross basis as the Company is (i) the primary entity responsible for fulfilling the promise to provide the specified products in the arrangement with the customer and provides the primary customer service for all products sold on Chewy's websites or mobile…
• FY2025 10-K: …as the largest amount that is more than 50% likely of being realized upon resolution of the contingency. The Company records interest related to uncertain tax positions within interest expense in the consolidated statements of operations and within other long-term liabilities on the Company's consolidated balance…
• BABA (Alibaba Group Holding Limited)
• (no filing in the citation store)
• PDD (PDD Holdings Inc)
• FY2025 20-F: …reportable segment disclosure requirements through enhanced disclosures about significant segment expenses, and provided new segment disclosure requirements for entities with a single reportable segment. We adopted ASU No. 2023-09, Income Taxes (Topic 740) : Improvements to Income Tax Disclosures ("ASU 2023-09") on…
• FY2025 20-F: ) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.