The Etsy Inc. (Nasdaq: ETSY) stock price is down 4.3% in afternoon trading today (Tuesday). ETSY stock has now fallen 27% since Aug. 1 and currently trades at $15.22 a share.
One reason why the Etsy stock price is down is volatility in the broader U.S. market. As of 2:25 p.m., the Dow Jones Industrial Average and Nasdaq Composite were down 1.5% and 2.1%, respectively.
But shares of the handmade goods marketplace are also being crushed today by one of its biggest competitors - Amazon.com Inc. (Nasdaq: AMZN).
Back in May, Amazon announced it was developing its own online marketplace for artisan goods. The company is calling it "Handmade" and quietly launched a beta version allowing users to apply to sell their products on the soon-to-be-finished platform.
While no official launch date has been announced, it's clear that Amazon Handmade could be an "Etsy killer." Amazon's 278 million active accounts dwarf Etsy's 21 million users. That means the Etsy stock price could fall much lower if Amazon Handmade finds early success.
Since its April 16 debut, Etsy has been considered one of the worst IPOs of 2015. The Etsy stock price has plunged 49.3% from its first-day close of $30 a share.
Here's why investors should continue avoiding Etsy stock moving forward...
The first reason Etsy is a bad investment is the company's lack of profitability.
Etsy's operating expenses have skyrocketed in the last couple years. They increased 81.4% in 2013 and 67.6% in 2014. Although the company is slowly reducing costs, the operating expenses of $43.2 million in the second quarter alone show the company is still a long way from turning a profit.
The second reason is Etsy's B Corp. certification...
The B Corp. status defines the company's mission. The certifications are awarded by B Lab, a nonprofit that, according to its website, "uses the power of business to solve social and environmental problems." B Corp. certifications are awarded to companies meeting various social, environmental, and accountability standards.
But these values threaten Etsy's ability to turn a profit. Company management prioritizes shareholder and community well-being over the success of Etsy stock.
Etsy wants investors to embrace its mission to be both socially conscious and financially successful.
"It's like a beautiful test in a way to see if it's possible to have a mission beyond money," said Rett Wallace, CEO of Triton Research, to Bloomberg. "You see these situations all the time where even management is doing their best to take every penny off the table - regardless of what it does to the widows and orphans - you often see fund managers saying, 'You're not doing enough to make money.'"
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