Is Etsy’s 52% Rally Justified After Latest Product Updates?

Trying to decide whether to hold, buy, or sell Etsy can feel like trying to pick the perfect handmade gift. Over the past year, Etsy’s stock has packed a punch for anyone along for the ride, bouncing up 3.4% this past week and 18.0% over the last month. After a rocky few years, shares are now up a robust 51.9% versus this time last year. Even so, zoom out a bit further and you’ll see Etsy is trading 26.8% lower than three years ago and down a notable 44.2% from five years back. This highlights just how dramatic the highs and lows have been.

What is behind these moves? Investors have responded positively to Etsy’s latest product updates and growing trends in online shopping, particularly as more sellers tap into new features that help reach shoppers directly. Attention has also shifted to the company’s push into international markets, which some see as laying the groundwork for longer-term growth. While these developments have not moved the needle for everyone, they have helped renew optimism, even if bigger risks remain on the table.

When it comes to value, Etsy scores a 2 out of 6 on our valuation check, signaling there are still plenty of questions about just how much upside is left. So, how does Etsy stack up when you put the major valuation methods to the test? Let’s break down the numbers, then explore whether there’s a better way to judge what this stock is really worth.

Etsy scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Etsy Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model tries to estimate a company’s true worth by projecting future cash flows and discounting them back to what they would be worth today. In Etsy’s case, the 2 Stage Free Cash Flow to Equity model uses a combination of analyst estimates for the next few years and longer-term forecasts to build out this picture.

Etsy’s latest reported Free Cash Flow stands at $643 million. Analyst projections see this figure growing in the years ahead, reaching as high as $791 million by 2029. From there, further growth is extrapolated, ultimately forecasting around $1.03 billion in annual cash flow by 2035 based on gradual growth assumptions. All of these amounts are discounted to reflect the value of those future dollars in today’s terms, using $ as the reference currency.

The result is a calculated “fair value” intrinsic share price of $122.16 for Etsy. With shares currently trading about 39.5% below this DCF-implied value, the analysis suggests Etsy stock is significantly undervalued compared to its projected cash-generating potential.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Etsy.

Our Discounted Cash Flow (DCF) analysis suggests Etsy is undervalued by 39.5%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Etsy Price vs Earnings

The Price-to-Earnings (PE) ratio is one of the most widely used metrics for valuing profitable companies like Etsy. Because it directly links a company’s stock price to its earnings, the PE ratio provides a quick way to judge whether investors are paying too much, too little, or a fair price for each dollar of profit.

It’s important to remember that growth expectations and risks play a big role in what counts as a “normal” or “fair” PE. A higher PE often signals investors expect rapid profit growth or see the company as less risky. In contrast, a lower PE could hint at concerns about future earnings or business risks.

Right now, Etsy trades at a PE multiple of 44.6x, which is well above the Multiline Retail industry average of 22.1x and also higher than the average for its peers at 20.2x. At first glance, this might look pricey.

This is where Simply Wall St’s "Fair Ratio" comes in, here calculated at 24.9x for Etsy. The Fair Ratio is more sophisticated than industry or peer comparisons, as it accounts for the company’s specific earnings growth, risks, profit margins, size, and industry context. In short, it sets the bar higher for companies that deserve it and keeps expectations grounded for those that do not.

With a current PE of 44.6x versus a fair value of 24.9x, Etsy’s shares appear overvalued based on earnings multiples and its underlying fundamentals.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Etsy Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. Rather than focusing only on numbers and traditional ratios, a Narrative is your own perspective about a company: the story you believe about its future, including what drives its growth, how its revenue and margins will evolve, and what you see as a reasonable fair value. Narratives connect the dots from company stories and industry trends to actual forecasts and financial models, showing how your view translates directly into numbers.

With Simply Wall St, anyone can create and share their personal Narrative for Etsy right on the Community page, making this powerful tool accessible to millions of everyday investors. Narratives make deciding when to buy or sell far simpler by comparing your forecasted Fair Value to the current share price, and they are automatically updated as soon as fresh news or company results arrive. No extra work is required.

For example, one investor’s Narrative might highlight Etsy’s leadership in AI personalization and robust app engagement, projecting strong revenue growth and a fair value as high as $86.00 per share. Another might be more cautious, pointing to competitive risks and slowing buyer activity, with a fair value closer to $48.00. Narratives let you craft an informed outlook that fits your unique view of Etsy’s future.

Do you think there's more to the story for Etsy? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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