Etsy stock target cut, retains rating on cautious stance

On Tuesday, Bernstein analysts adjusted their outlook on Etsy (NASDAQ:ETSY) shares, reducing the price target for the online marketplace from $60.00 to $55.00 while retaining a Market Perform rating.

According to InvestingPro data, analyst targets for Etsy currently range from $44 to $105, with the stock showing significant volatility. The revision reflects a more cautious stance on the company's Gross Merchandise Sales (GMS) growth and earnings before interest, taxes, depreciation, and amortization (EBITDA), which stands at $438.7 million for the last twelve months.

In their assessment, Bernstein noted a consistent softness in the data they monitor, suggesting that Etsy has not yet reached a positive turning point. The analysts anticipate that year-over-year declines could continue into 2025.

Despite these concerns, InvestingPro analysis indicates the company maintains impressive gross profit margins of 71.2% and an overall "Good" financial health rating. Consequently, they have revised their GMS growth forecast from a previous 0% to a -2% year-over-year decline, which also affects their EBITDA projections.

The report acknowledges Etsy's strategic investment in search-related initiatives, which is considered a prudent focus area. However, the reallocation of resources towards these initiatives is believed to exert some pressure on near-term GMS, described as an 'opportunity cost.' Despite this, Etsy is expected to move past these initial challenges in the second half of the year, which could potentially lead to an improvement in GMS trajectory.

The new price target of $55 represents a decrease of $5 and is based on a discounted cash flow (DCF) method and a reduced multiple of 9.5x enterprise value to EBITDA, down from the previous 10x. Bernstein's estimates for GMS and EBITDA from 2026 onwards are about 3-4% lower than the average Wall Street forecasts. The firm's analysis implies a degree of caution regarding Etsy's near-term financial performance, while also suggesting a potential for recovery in the latter half of the year.

In other recent news, Etsy Inc (NASDAQ:ETSY). announced a new employee stock award plan, approved by the company's Board of Directors, aimed at attracting and retaining talent. The plan, dubbed the Etsy, Inc. 2024 Inducement Plan, reserves 1,000,000 shares of Etsy's common stock for issuance to new employees.

In addition, Etsy has been the subject of various analyst assessments. Bernstein maintained its Market Perform rating on Etsy shares, while Goldman Sachs raised Etsy's price target but maintained a Sell rating. Citi also adjusted the company's price target while retaining a Neutral stance.

Etsy's recent financial performance revealed revenues surpassing expectations and an Adjusted EBITDA above forecast, although Gross Merchandise Sales (GMS) experienced a year-over-year decline. The company also announced significant changes to its executive team, including the promotion of Kruti Patel Goyal to President and Chief Growth Officer, and the appointment of Lanny Baker as the Chief Financial Officer.

In other recent developments, U.S. e-commerce sales during Cyber Weekend saw a 9% increase this year, suggesting a continued expansion of online shopping. This trend could be significant for online marketplaces like Etsy. These developments highlight Etsy's strategic moves to attract talent, enhance customer experience, and foster long-term growth.

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