UPDATE: UBS Assumes Etsy (ETSY) at Sell
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UBS analyst Kunal Madhukar assumes coverage on Etsy (NASDAQ: ETSY) with a Sell rating and a price target of $215.00.
The analyst comments "We initiate coverage of Etsy Inc. (ETSY) shares with a Sell rating and $215 price target. Etsy has historically traded at a premium to other eCommerce names, but is currently trading at valuations where the implied growth may be extremely optimistic. We get that COVID uncertainty continues, compounded by supply disruptions, especially in the 4Q. We also get that the awareness of Etsy's depth and breadth are much more now versus pre-pandemic levels, which has resulted in better retention, higher frequency, and more spend per buyer. Yet, when we take a 12-month view, we think current valuations are not sustainable because 1) Etsy operates in a niche category which limits its TAM, 2) within this TAM, Etsy is already 10% penetrated (vs 5.5% of retail for Amazon, and much lower for other eCommerce players), 3) thus, while momentum has continued despite tough comps, Active buyer growth has stalled, and increase in spend alone may not be enough to deliver on the expected growth, 4) when that happens, as it did prepandemic, multiples could derate, and 5) while Etsy can add some value via acquisitions, we think much of that value creation was already paid for in the transaction price."
Shares of Etsy closed at $259.28 yesterday.
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