These 5 Stocks Can Crash After Federal Reserve’s Latest Rate Hike

1. Etsy, Inc. (NASDAQ:ETSY)

Debt-to-Equity Ratio: 3.91

Number of Hedge Fund Holders: 29

Etsy, Inc. (NASDAQ:ETSY) operates an e-commerce platform that offers vintage items and craft supplies for consumers. Etsy, Inc. (NASDAQ:ETSY) can suffer in a slowdown due to the discretionary nature of its business. Moreover, according to the company’s second-quarter balance sheet, Etsy, Inc. (NASDAQ:ETSY) has total debt of $2.39 billion and a debt-to-equity ratio of 3.91. If the Fed raises interest rates, Etsy, Inc. (NASDAQ:ETSY) can suffer and its cash flows can be strained.

This September, BofA analyst Curtis Nagle initiated coverage of Etsy, Inc. (NASDAQ:ETSY) with a Neutral rating and a $120 price target. The analyst is cautious about the company’s performance in the near-to-medium term as he sees macroeconomic headwinds and declining consumer demand impacting the shares. As of September 19, the stock has tanked 46% year to date.

At the close of Q2 2022, 29 hedge funds were eager on Etsy, Inc. (NASDAQ:ETSY) and held stakes worth $595.8 million in the company. This is compared to 43 positions in the previous quarter with stakes worth $668.5 million. The hedge fund sentiment for the stock is negative.

As of June 30, Two Sigma Advisors owns more than 1.5 million shares of Etsy, Inc. (NASDAQ:ETSY) and is the leading shareholder in the company. The investment covers 0.32% of Two Sigma Advisors’ 13F portfolio.

Here is what Oakmark Funds had to say about Etsy, Inc. (NASDAQ:ETSY) in its second-quarter 2022 investor letter:

“We became interested in Etsy (NASDAQ:ETSY) when Josh Silverman took over as CEO in 2017. The company had long been recognized as a great marketplace, but prior management was not focused on maximizing shareholder value. In short order, Silverman transformed Etsy from a borderline non-profit into a higher-margin, faster-growing enterprise. The pandemic helped accelerate already strong fundamental business results as millions of new customers were introduced to the platform while stuck at home. But like so many other Covid-19 “winners,” Etsy has since fallen deeply out of favor with investors, which prompted us to take a closer look. Following a 75% decline in its stock price, the company now trades for 3.5x next year’s revenue or just a low double-digit multiple of operating profit using our estimate of normalized margins. We believe this is an attractive price to pay for a unique digital marketplace with a long runway for future growth. Note that our exposure to Etsy is currently established via options.”

You can also take a look at 10 Stocks That Benefit From Interest Rate Hikes and 10 Long-Term Stocks To Buy During Recessions.

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