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Etsy Drops After Reality Check on Long-Term Growth Outlook

Etsy Inc., the online marketplace known for unique and quirky items, dropped the most in almost four months as the initial boost from recent strong earnings wore off and a negative long-term outlook concerned investors.

Brooklyn, New York-based Etsy soared after posting Tuesday its first quarterly profit since becoming a public company. But that wasn’t enough to sustain the shares. Analysts said decelerating growth and lingering questions about the company’s long-term strategy triggered as much as a 10 percent decline in the stock on Friday, the biggest intraday fall since Jan. 11. The shares dropped 8.4 percent to $8.22 at 12:11 p.m. in New York.

“The valuation at $8 dollars makes a lot more sense than at $9 or above,” said Gil Luria, an analyst at Wedbush Securities Inc., who rates the company a hold. “Going into the quarter, a lot of people thought Etsy was going to zero.”

Etsy reported first-quarter revenue and profit that beat analysts’ estimates, in the...