Bernstein on Etsy (ETSY): 'Tough to get Bullish Until We Have Better Visibility on GMS Improving'

Bernstein SocGen Group analyst Nikhil Devnani reiterated a Market Perform rating and $55.00 price target on Etsy (NASDAQ: ETSY).

The analyst commented: "ETSY has been a fruitful short for Internet investors. Looking beyond the initial pandemic boom and bust that impacted the whole sector, ETSY shares have been cut by -64% since early February 2023, while the S&P500 is up 45% over the same timeframe. At what point has the trade played out? It comes down to Gross Merchandise Sales (“GMS”) growth.

ETSY estimated the opportunity cost of pivoting headcount away from grinding out ‘GMS wins’ was worth ‘several percentage points’ of growth. These initiatives have created easy comps and should start to pay back in 2025, a tailwind to GMS trends.

Our take: It is tough to get bullish until we have better visibility on GMS improving. Q3 disappointed (core Etsy -6% Y/Y), Q4 guidance was soft, and real time alt data has been mixed. Sell-side GMS estimates seem a bit optimistic to us and may need to be cut. There's certainly a debate to be had on ETSY's longer-term growth profile too. But ETSY has the most to gain from a perception shift in our coverage, so it’s worth discussing the path. We believe ETSY needs to unlock more order frequency given the size of its audience and the declining contribution from New Buyers."

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 $53.12 yesterday.

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