The Santa Monica, Calif.-based company said that it will begin selling hobby products and party goods in time for the holiday season. eToys already sells books, music, videos and baby products.
The move is an attempt by the company to break from the seasonal nature of toy sales, said Goldman Sachs financial analyst Anthony Noto, who praised the move. In the past nine months of last year, the only period for which records are available, 84 percent of eToys revenues came in the fourth quarter.
"My thesis has been that eToys is positioning themselves as family solutions provider," Noto said. "The pieces of their business model are coming together."
Profit-hungry investors have abandoned eToys lately, as well as many other e-commerce stocks. The company's shares have fallen from a high of $86 last October to $7.09 at the 1 p.m. PT close of regular trading today and are down 73 percent for the year.
The new stores and eToys' push to control marketing costs, also announced today, should help the company's bottom line, Noto said. But he said its shares may take awhile to recover.
"Investors are building position in an orderly fashion without driving up the stock price," he said.