Etsy Is Getting a New CEO. Could This Be the Beginning of a Turnaround?

Etsy (NYSE: ETSY) has been one of the most disappointing stocks of the post-pandemic era.

The online marketplace for handmade and vintage goods has struggled to return to growth after a surge of interest during the stay-at-home period. As a result, the stock is down 77% from its pandemic-era peak. It plunged in 2022 and has stayed down since then.

The stock tumbled again on Wednesday, even as Etsy beat third-quarter estimates. Investors seemed to be spooked by the announcement that CEO Josh Silverman would be leaving the company after eight years.

Silverman had led the company for much of its publicly traded era. He helped turn around the business when he arrived in 2017, laying off staff, curtailing cushy perks, and committing to narrowing the focus of the business and serving end customers.

Now, at a time when Etsy needs another turnaround, Silverman has decided that it will have to happen under someone else's watch.

Out with the old

In a press release, Etsy said that current President and Chief Growth Officer Kruti Patel Goyal will become the next CEO, effective Jan. 1, 2026. The release said that Silverman had decided to step down as CEO at the end of the year. He is expected to serve as Executive Chair through 2026.

Goyal was previously the CEO of Depop, following Etsy's acquisition of it in 2021. Depop has been a rare bright spot for Etsy since its acquisition of the Instagram-like platform for selling vintage clothes and other goods. Goyal said she was honored and excited to become Etsy CEO, adding: "I believe that we have been on the right track this year in our efforts to return our core marketplace to GMS growth and deliver value to our community and our shareholders."

When she was CEO of Depop, gross merchandise sales and its buyer base nearly doubled. It was also the fastest-growing online apparel resale marketplace in the U.S. Goyal has also held a variety of roles in Etsy, working there for 10 years before leading Depop.

Can Etsy come back?

Despite the recent malaise at the company, Etsy has actually had a winning year. Even after the post-earnings sell-off, the stock is up 24% for the year on some signs of improving performance, and its embrace of ChatGPT's Instant Checkout, which could help drive traffic to the platform.

In the third quarter, gross merchandise sales, the total value of goods sold on the platform, returned to growth adjusted for the sale of Reverb, rising 0.9% to $2.72 billion. However, GMS on the Etsy marketplace was still down 2.4%, while Depop grew GMS by 39.4% to $292.1 million, driving the growth in the business.

The company's take rate, or the percentage of revenue it collects on sales, is improving thanks to on-site ads and fee increases. Revenue in the quarter rose 6.1% to $678 million, excluding Reverb, which beat the consensus at $657.1 million.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was $171.9 million, down from $183.6 million. Generally accepted accounting principles (GAAP) earnings per share rose from $0.45 to $0.63, ahead of the consensus at $0.52.

At this point, Etsy trades at roughly 10 times adjusted EBITDA, though more than a third of that is driven by share-based compensation.

The next CEO will have to do something more to shake up the business than Silverman did, as the recent modest recovery isn't enough to sustain the stock's growth.

Etsy has potential. It's a unique brand and marketplace, but it seems to have reached market saturation without reinvention. We'll learn more when Goyal takes the helm in a couple of months, but a change in direction could be a breath of fresh air for the company. Investors will be watching closely.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Etsy. The Motley Fool has a disclosure policy.