12:57 PM, Mar 8, 2019 — Etsy (ETSY) has opportunities for continued product developments that would drive more growth, but making improvements is getting “incrementally more challenging,” Wedbush Securities said in a note Friday.
The online crafting marketplace said at its investor day on Thursday that it has five-year targets for 16% to 20% growth in its gross merchandise sales, revenue growth slightly faster than GMS and 30%-plus adjusted margins in earnings, before interest, taxes, depreciation and amortization.
“While we’ve increasingly warned to not only Etsy’s market opportunity but its ability to capture it, we still remain cautious with valuation at such a premium,” analysts Ygal Arounian and Amir Chaudhri, who have a neutral rating and a $60 12-month price target on the stock, said in the note.
Social commerce on platforms like Facebook (FB), Instagram and Pinterest should be marketing focuses for Etsy, and there’s still work to be done on getting current users to come to the site more often, they said.
Wedbush isn’t expecting any price increases in the costs to sellers for using Etsy, but Arounian and Chaudhri said “in all likelihood, there aren’t as big levers to pull going forward.” Etsy is committed to its marketplace model, but they said there can be product and services launches to “drive upside.”
Etsy’s new management team has turned around a business model that Wedbush described as challenged and they’ve made product improvements that sped up sales as well as implemented the first ever price increase.
“On the other hand we still see long-term demand constraint on this two sided marketplace as we believe a craft marketplace, while having value, is a difficult one to truly move buyers to visit more frequently,” the analysts said.
Companies: Etsy, Inc.
Price: 67.25 Price Change: +0.01 Percent Change: +0.01