The Etsy story

What drives the business

• Etsy connects independent merchants with shoppers seeking distinctive goods, with custom or made-to-order merchandise accounting for about 30% of marketplace gross merchandise sales, or GMS, in 2025.
• It holds no physical inventory and earns transaction, payment processing and listing fees, plus revenue from optional advertising and shipping services.
• The disposal of Reverb in June 2025 and Depop to eBay on July 30, 2026 narrowed the business to Etsy, with the Depop proceeds supporting general corporate purposes and plans to accelerate share repurchases.
• Search, personalized recommendations and loyalty initiatives aim to increase purchase frequency, while improvements to Etsy Ads helped marketplace revenue grow 9.3% to $668 million in the quarter to June 2026, with a take rate of 25.9%.
• Active customers increased by approximately 350 thousand sequentially to about 87 million in the quarter to June 2026, while trailing twelve-month GMS per active customer rose 2.8% to $124.

What the price assumes

At $68.92, TenQ's reverse DCF implies free cash flow after stock pay grows 1.8% a year for ten years, using a discount rate of 10.2%.

That compares with growth of 54.4% a year over the last 10 years and the TenQ check's bar of 29.2%, which slows that historical record halfway toward 4%.

The implied growth clears that check, but the historical record spans a broader marketplace portfolio than the business remaining after the divestitures.

Value ETSY on your own assumptions

What could change the story

• Purchase frequency remained modestly below prior-year levels over the twelve months to June 2026, and higher listing prices were the main driver of higher order values, leaving repeat engagement an unresolved part of the recovery.
• The restructuring affects approximately 220 employees, about 12% of the workforce, primarily in Product and Engineering, creating execution risk for the teams responsible for discovery and retention improvements.
• TenQ's financial health checks passed 2 of 6, with negative equity, $3.0 billion in debt and $1.1 billion in cash and short-term investments highlighting balance sheet constraints.
• The new $2 billion repurchase authorization follows distributions equal to 99.8% of free cash flow over the last twelve months, making the allocation of Depop proceeds important to financial flexibility.
• Revenue growth of 6.7% over the last twelve months and 4.0% annually over the last three years both failed TenQ's sector growth checks, despite the improvement in Etsy marketplace activity.

What to watch next

• For the third quarter of 2026, Etsy expects GMS of $2.53 billion to $2.58 billion, representing 4-6% growth, a take rate of approximately 26% and an adjusted EBITDA margin of 28-30%.
• For full-year 2026, management expects mid-single-digit marketplace GMS growth and an adjusted EBITDA margin of 29-30%, with the increased margin outlook incorporating restructuring savings.
• Active customer counts, purchase frequency, habitual customer trends and GMS per active customer will show whether growth is broadening beyond higher order values.
• Etsy expects the restructuring to be substantially complete by the end of the third quarter of 2026, with estimated charges of $35 million, making progress on product initiatives alongside those changes another measure of execution.

Sources

• Etsy's earnings release, filed with the SEC
• Its latest 10-Q or 10-K, for the risk factors
• The ETSY stock report, for every figure and check