Etsy Stock (NASDAQ:ETSY)
Investors are nervous about rising interest rates as they await tomorrow’s fed funds rate decision, and Etsy stock is falling along with the rest of the market.
The online marketplace for handmade goods appeared to be struggling independently due to a lackluster analyst note.
The ETSY stock was down 6.3% as of 2:42 PM ET.
What’s the Reason?
To prepare for tomorrow’s rate increase, Treasury rates jumped today. The market generally anticipates a 75 basis point increase in the benchmark fed funds rate from the Federal Reserve, putting it in the 3%-3.25% target range. While the rate hike is already included in current stock prices, any comments by Fed Chairman Jerome Powell about future rate hikes could cause a significant shift in the market.
The yield on the benchmark 10-year Treasury note rose by 2% today to 3.56%, its highest point since 2011. The yield on the shorter-term 2-year note also approached 4%. When the two-year yield exceeds the 10-year yield, it indicates an impending economic downturn.
Etsy’s stock price is particularly vulnerable to interest rate fluctuations because it is a growth stock depending on consumer discretionary spending.
Today, Bank of America also began covering Etsy stock (NASDAQ:ETSY), assigning the online marketplace a “neutral” rating, and setting their price target for the stock at $120. Even though this price target represented a small upside of roughly 8% in the stock price before today’s dip, analyst Curtis Nagle stated he is hesitant about reaccelerating growth due to unfavorable comparisons and high macro risk.
Like many growth stocks, Etsy stock has been volatile over the past year, plunging over 80% before bouncing roughly 50% off those lows in the following two months.
Etsy stock appears to be doing well as a business because there aren’t many other e-commerce sites that directly compete with it. But Nagle is correct in saying that it has to contend with some strict parallels. Etsy’s (NASDAQ:ETSY) latest quarterly report showed a decline in merchandise sales, and its forecast for the current quarter was similarly conservative.
Investors may need to revise their expectations for Etsy’s (NASDAQ:ETSY) growth after its sales increased by triple digits during the epidemic.
Featured Image- Megapixl @NycRuss