Ask Matt: Is Etsy worth a look?

Q: Is Etsy worth a look?

A: Etsy (ETSY) is trying to prove a small niche can bring big profits. So far, the big profits part has been elusive.

Etsy is a marketplace for fans of hand-crafted goods. It’s definately a niche. As of the fourth quarter, Etsy said it had 1.6 million active sellers and more than 24 million active buyers as of the fourth quarter. That’s pretty small compared with other e-commerce players. EBay, for instance, reported 162 million active buyers as of the end of the fourth quarter.

Small isn’t necessarily a bad thing - if the niche is more profitable. But that’s not the case either. Etsy told investors late Tuesday it lost $4.2 million in the fourth quarter. It has lost money in the past nine straight quarters. Shares of Etsy rose about 10% after-hours since the company lost less than expected. But the stock fell 56 cents, or 7%, to $7.39 in regular trading and is down 75% over the past year. Unlike some other dot-coms running low on cash, Etsy is fairly well capitalized. The company ended 2015 with $292.9 million in cash and short-term investments. The company is also free-cash flow positive, to the tune of $18 million in 2015. But it’s hard to get too excited over an opportunity this small. Analysts see the stock worth $11.38 a share in 18 months, but rate the stock a “hold.”

Paste BN markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at mkrantz@usatoday.com or on Twitter @mattkrantz.