Etsy
has been added to Evercore ISI’s “tactical underperform” list, despite its analysts maintaining a stock rating of Outperform.
Analyst Shweta Khajuria attributed the Outperform rating to
Etsy
‘s management team, business model, market opportunity, and differentiated value proposition, and gave the stock a price target of $115.
Despite this list of positives for
Etsy
(ticker: ETSY), Evercore outlined several points of concern for the stock.
First, consumers are feeling shaky about the economy—with 50% of Evercore’s survey participants saying they are “somewhat-to-very pessimistic about the future direction of the U.S. economy.” Analysts view “consumer confidence” as a pulse on future spending, and these “results indicate near-term caution.”
Second, there is less in the virtual shopping carts, and those carts are filled less often. “Etsy customers that make purchases at least 2-3 times a month decreased from 25% in June to 16% in the current survey. Meanwhile Etsy customers that make purchases once every 6 months or even less frequently ticked up 16%,” Khajuria wrote.
Third, Etsy consumers are spending less—with the weighted average spend of customers dipping to about $60 in November from about $100 in June, which “could be due to the lower frequency of purchases…or customers buying less expensive products,” Khajuria wrote.
Despite those points of concern, Evercore analysts maintain their Outperform rating, saying in the long term they “remain optimistic in Etsy’s ability to continue to gain market share and generate healthy topline growth while generating healthy EBITDA [before interest, taxes, depreciation, and amortization] earnings margins.”
In early November, the company reported third-quarter earnings, which included revenue of $594.5 million—an increase of 11.7% year-over-year—and management shared positive sentiment ahead of the holidays.
“We don’t know whether consumers will spend more or less on gift giving, or whether they’ll do more shopping online or in the mall. But the good news is our business…doesn’t depend upon us taking big bets on these questions in the same ways most other retailers or e-tailers must,” said CEO Josh Silverman in the third-quarter earnings statement.
Etsy stock was down 3.5% to $120.94 early Wednesday. So far this year, the stock has tumbled nearly 43%.
Target
(ticker: TGT) joins Etsy on the tactical underperform list, following a disappointing third-quarter earnings report that included operating income tanking by almost 50%.
Write to Emily Dattilo at emily.dattilo@dowjones.com
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