Wedbush Downgrades Etsy (ETSY) to Underperform; More than 5% of Items May be Counterfeit or Infringe on Rights

Wedbush downgraded Etsy (NASDAQ: ETSY) from Neutral to Underperform with a price target of $14.00, saying the counterfeit risks is broader than anticipated.

Analyst Gil Luria commented, "We expect Etsy to enjoy rapid near-term growth within its niche as it increases marketing spend, including a strong Q1 report on May 19. However, our analysis and discussions with IP lawyers lead us to believe questionable seller practices may draw increased scrutiny, eventually limiting volume growth. Considering a limited TAM and shares trading at nearly double the most expensive comparable at 66x EBITDA we are downgrading to Underperform from Neutral."

The firm's research indicates as many as 2 million items on Etsy ( > 5% of all merchandise) may potentially be either counterfeit or constitute trademark or copyright infringement. "We believe the share of GMS may be greater considering Etsy has become a go-to destination for counterfeits," he said.

Counterfeit candidates include items infringing on Louis Vuitton, Chanel and Michael Kors, as well as a wide range of Disney and NFL brands.

For an analyst ratings summary and ratings history on Etsy click here. For more ratings news on Etsy click here.

Shares of Etsy closed at $22.71 yesterday.

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