Etsy is tumbling

Etsy shares fell as much as 5% in trading on Thursday morning.

The company has a big new competitor. Amazon is launching a marketplace for handcrafted goods called Amazon Handmade on Thursday.

According to the AP, Amazon Handmade will have 5,000 sellers with 80,000 items when it launches. That pales in comparison to Etsy, which reported 1.5 million active sellers in its second quarter earnings results.

However, since it was announced, analysts have been flagging Amazon Handmade as a potential cannibal of Etsy’s business.

In a note to clients last week, Wedbush analysts wrote, “We expect Etsy to enjoy near-term growth within its niche as it increases marketing spend. However, we believe the dilution of the brand by potentially counterfeit and mass manufactured items may curtail listing and revenue growth, especially as sellers shift their items to Handmade at Amazon. We believe shares may be under pressure in the near term as the post-IPO lock up expiration coincides with the launch of Handmade at Amazon.”

The lock-up period, during which company insiders and majority shareholders are not allowed to sell their shares, ends October 13.

Etsy shares are down 55% from the IPO in April. Here’s a chart showing the lifetime of the stock:

Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.

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