Shares of Etsy Inc. (NASDAQ:ETSY) tumbled 10 percent Monday after analysts downgraded shares of the online crafts marketplace, warning that the company is facing a problem with counterfeit goods offered on its network. The downgrade comes less than a month after the Brooklyn, New York, e-commerce platform for handmade and vintage goods made its stock market debut in an IPO that valued the company at more than $2 billion.

Etsy's stock fell to as low as $20.02 in afternoon trading Monday. Since the company's April 16 initial public offering, the stock has lost nearly a third of its value.

Wedbush Securities Inc. downgraded Etsy’s stock to “underperform” from “neutral,” with a 12-month price target of $14. “Our research indicates as many as 2 million items on Etsy (around 5 percent of all merchandise) may potentially be either counterfeit or constitute trademark or copyright infringement,” Gil Luria and Aaron Turner, analysts at Wedbush, said in a research note Monday.

Counterfeit items include those that infringe on Louis Vuitton, Chanel and Michael Kors, and a wide range of Disney and NFL brands, the analysts said. A sample of high risk listings indicated some violations may be 20 times more likely on Etsy than on eBay Inc. and even more likely than Alibaba Group Holding Ltd.’s Aliexpress, the firm said. 

“If Etsy chooses to continue to ignore these potential violations, we believe it could tarnish its brand with both buyers and sellers,” the analysts warned. “Considering the broad backlash on Alibaba regarding inauthentic merchandise, we expect added scrutiny given the social responsibility ethos at the core of its Etsy’s brand.”

Even before the Wedbush analysis, Etsy was confronting profitability issues. The company has a history of operating losses and may not achieve or maintain profitability in the future, the company warned in its S1 filing. While the company posted 2014 revenue of $195.6 million, up more than 56 percent from a year earlier, it reported net losses of $15.2 million in 2014 and $800,000 in 2013.

Shares of the company’s stock opened for trading at $31 and rose as high as $35.67, more than doubling its initial pricing of $16 per share. As of Dec. 31, the site had roughly 20 million active buyers and 1.4 million active sellers. Etsy says it hopes to use money generated from its IPO to grow the business.