Etsy (ETSY) Falls Over 4%, Morgan Stanley Analyst Downgrades on 'Expensive' Valuation

Etsy (NASDAQ: ETSY) shares sold off nearly a dollar or roughly 4.5% Friday morning following a downgrade from Morgan Stanley to Underweight (from Equal-weight) with a new price target of $17.00 (from $13.50).

Analyst Brian Nowak believes the current valuation is “too expensive” relative to the company’s peer group and its historical mean. He raises his price target to better reflect the model assumptions for cost savings and a lower tax rate of 26% (from 36%). The analyst believes that a lack of evidence regarding management’s ability to deliver faster than expected top-line growth will keep investors away from the equity noting investors likely will not be willing to buy-in at the current valuation multiple.

Nowak further comments “We view our implied multiple of 13X as a more appropriate level that investors would be willing to pay in the long-run, especially given that Amazon (Handmade) continues to show interest in breaking into this category (while AMZN doesn't have the same supply or sellers, it does offer unique propositions such as 1-2 hour delivery that ETSY would not be able to match).”

The new price target of $17.00 represents roughly 17% downside from Thursday's closing price of $20.56.

StreetInsider Premium first published a variation of this article at 4:34AM ET. Try StreetInsider Premium for two weeks free here.

You May Also Be Interested In

• Jefferies Downgrades Calix (CALX) to Hold
• Koninklijke KPN NV (KPN:NA) (KKPNY) PT Raised to EUR4.60 at JPMorgan
• BofA Securities Upgrades Bharat Forge Ltd. (BHFC:IN) to Buy