Bear of the Day: Etsy (ETSY)

Can Etsy, Inc. (ETSY) turn it around? This Zacks Rank #5 (Strong Sell) is actually supposed to be profitable by next year.

Etsy operates an online marketplace where people make, sell and buy unique goods.

It allows entrepreneurs to set up an online shop and reach a customer base they otherwise might not be able to do on their own.

Etsy Acquires Blackbird Technologies

On Sep 19, Etsy announced it was acquiring privately-held Blackbird Technologies, Inc.. Terms of the deal were not disclosed.

Blackbird operates technology that combines images and text using artificial intelligence to enhance search in the shopping experience.

Etsy has over 40 million unique listings. The technology should make it easier for customers to search the site.

Handmade is In

In a world where everything seems to be made by machines, there is something very attractive about handmade goods. Etsy taps into that need. Even Amazon has recognized there is a market in handmade goods as it has launched Amazon Handmade in Europe.

The growth is in the numbers.

In 2015, Etsy saw sales of $273.5 million. The Zacks Consensus Sales Estimate is looking for $364.8 million in 2016, or growth of 33.4%.

2017 looks equally healthy as sales are expected to rise another 24% to $451 million.

Turning a Profit Soon

Etsy went public in 2015 but it was not yet profitable. It lost $0.15 a share in 2015.

It's still going to lose money in 2016, however. The Zacks Consensus Estimate is looking for a loss of $0.06 this year.

But it looks like 2017 could be a break out year. The analysts are looking for $0.14 a share.

So Why Is It a Strong Sell?

One earnings estimate was lowered for full year 2016 in the last month. With just 2 estimates, that's enough to push the Rank lower.

However, the company reports on Nov 1, so the estimates will likely be updated then.

Remember, the Zacks Rank is a short term 1-3 month recommendation.

Shares Off 50% from IPO High

Like many IPOs, Etsy went out of the gate last year very hot. The shares have been on a downward spiral since then but recently they've turned around as the fundamentals have improved.

If you want to be in the online retail space and are looking for a company with a little bit stronger fundamentals right now, you should consider Amazon (AMZN). It competes with Etsy in the online retail space but is a Zacks Rank #1 (Strong Buy) right now.

More Stocks to Sell. Now.

Beyond our Bear Stock of the Day, today's list of 220 Zacks Rank #5 Strong Sells demand even more urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. Many appear to be sound investments but, since 1988, such stocks have actually performed more than 11X worse than the S&P 500.

See today's Zacks ""Strong Sells"" absolutely free >>.

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