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On Thursday, BofA Securities adjusted its outlook on Etsy stock (NASDAQ:ETSY), reducing the price target from $50.00 to $48.00, while the firm continues to hold a Neutral stance on the company’s shares. The stock, currently trading at $43.48, has experienced significant volatility, with InvestingPro data showing a 37.7% decline over the past year. Notably, analyst targets for the stock range widely from $31 to $92.45, reflecting mixed sentiment about the company’s prospects. Curtis Nagle, an analyst at BofA Securities, noted that Etsy’s Total (EPA:TTEF) Gross Merchandise Sales (GMS) saw a year-over-year decrease of 6.5% to $2.79 billion, which was in line with both the Street’s and BofA Securities’ expectations. Etsy’s own GMS dropped by 8.9% compared to the previous year.
The management team at Etsy is actively working to reinvigorate growth, with recent enhancements to the mobile application aimed at improving user experience and product discovery. These updates have led to better performance in app-based GMS compared to non-app transactions. Despite a decline in GMS, Etsy’s sales reached $651 million, marking a 1% increase over the Street’s projections. This uptick was primarily fueled by the growth of on-site advertising revenue. According to InvestingPro, the company maintains strong financial health with a current ratio of 2.14, indicating solid liquidity to support its growth initiatives.
However, Etsy’s gross margin has seen a contraction, falling 180 basis points year-over-year to 71.1%, which was below the Street’s expectation of 72.9%. The contraction in gross margin is attributed to increased costs associated with search and machine learning capabilities, as well as shipping. Nevertheless, efficiencies in non-GAAP Research and Development (R&D) and General and Administrative (G&A) expenses have allowed Etsy to achieve an EBITDA margin that was 60 basis points higher than the Street’s forecast, reaching 26.3%.
Etsy’s take rate, which represents the portion of GMS that the company retains as revenue, stood at 23.3%, aligning with the Street’s predictions. The mixed financial outcomes reflect Etsy’s ongoing efforts to navigate a challenging e-commerce landscape while investing in its platform to drive future growth. The company’s focus on enhancing its mobile app and on-site advertising capabilities appears central to its strategy moving forward. InvestingPro analysis suggests the stock is currently undervalued, with additional insights available in the comprehensive Pro Research Report, which covers key metrics and growth drivers for over 1,400 US stocks.
In other recent news, Etsy reported its first-quarter 2025 earnings, revealing a significant miss in earnings per share (EPS) with a loss of $0.49, compared to the forecasted gain of $0.47. Despite this, the company slightly exceeded revenue expectations, reporting $651 million, a 1% year-over-year increase. The company’s Gross Merchandise Sales (GMS) declined by 6.5% to $2.8 billion, reflecting ongoing challenges in consumer spending. Etsy’s management has forecasted a similar GMS decline for the second quarter, with potential for slight improvement. In strategic moves, Etsy divested its Reverb marketplace for $105 million, allowing a stronger focus on its core business and Depop. Analyst firms Bernstein and Goldman Sachs both adjusted their price targets for Etsy, with Bernstein reducing it to $45 and Goldman Sachs to $31, citing ongoing performance challenges. Despite these hurdles, Etsy continues to invest in enhancing its platform, including improvements in its search and recommendation engine, and an increased focus on paid social marketing. The company is also monitoring macroeconomic factors such as tariffs, which could potentially impact its business.
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