Designer Elena Ruano Kanidinc sells items from her business SimplyNu at an Etsy event in Brooklyn.
Designer Elena Ruano Kanidinc sells items from her business SimplyNu at an Etsy event in Brooklyn. - 
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In just under a decade, Etsy has gone from a furniture maker's dream of an online crafts marketplace to a $3.3 billion publicly traded company to a company worth roughly half that. 

Wedbush analyst Gil Luria's explanation for the two-month slide in its stock price involves a cardboard box full of Etsy goods.

"I've bought my wife, you know, handmade jewelry. I've bought her hand-embroidered artwork. And most recently I've ordered a lot of counterfeit merchandise," he says.

He keeps them as evidence to back up his claims that the company has been slow to crack down on counterfeit and copyright- and trademark-infringing goods. 

"I actually found it to be 20 times more likely that you'll find a counterfeit item on Etsy than on Alibaba or Ebay," he says.

His bearish assessment of Etsy is that its push for growth has meant allowing counterfeit, copyright-infringing as well as factory-made goods—all of which ultimately water down its homespun image.

 

That image is on full display at a "craft party" under the Manhattan Bridge in Brooklyn.

An Etsy event beneath the Manhattan Bridge in Brooklyn, NY. 

"There's tinsel, there's balloons, there's lots of kids making crafts," says Cindy Peng, who sells jewelry as Cindy Penguin. 

At the next table, Tamara Garvey is even more gung-ho. "I love Etsy so much, I wouldn't sell at any other marketplace," she says.

Tamara Garvey sells her illustrations at an Etsy event in Brooklyn, NY.
Tamara Garvey sells her illustrations at an Etsy event in Brooklyn, NY. - 

But what's next for Etsy depends on there being enough sellers like Peng and Garvey to make up for sellers like Sherry Truitt. She sold handmade cufflinks made out of vintage maps on Etsy for seven years, but quit when she says her wares started getting crowded out of the search results by factory-made versions.

"Now it looks like Ebay or Amazon. And some of the companies sell on all three," she says.

The question now is whether Etsy will be able to defend and grow its DIY niche in the face of competition from the likes of Amazon's forthcoming handmade marketplace. It's this speculation about the future, more than how many cuff links were sold today, that determines the company's stock price. 

"You say how can you justify that market cap based upon its current operations, and the answer is you can't," says Jay Ritter, professor of finance at the University of Florida.

If that makes this whole stock price question sound speculative, it should. Ritter says the way tech companies are valued on their future profitability is why the prices jump up and down so much. It's also why he says the last time a stock price fall like Etsy's was commonplace was during the internet bubble of 15years ago.