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On Thursday, Goldman Sachs maintained a Sell rating on Etsy (NASDAQ:ETSY) with a steady price target of $45.00. According to InvestingPro analysis, the stock appears undervalued at its current price of $51.53, with strong fundamentals including a GOOD Financial Health Score. The firm’s analysis followed Etsy’s fourth-quarter earnings report, which revealed several key points. First, the company saw a nearly 7% year-over-year decline in consolidated Gross Merchandise Sales (GMS) for the quarter, with an almost 9% drop for the Etsy Marketplace specifically. Management anticipates a similar GMS decline in the first quarter of 2025 but expects an improvement in trends thereafter.
Despite the declines in GMS, Etsy’s adjusted EBITDA margins exceeded expectations in Q4, supported by robust gross margin expansion to 72.42%. The company generated $488.28M in EBITDA over the last twelve months, demonstrating strong operational efficiency. Management also shared insights into the company’s profitability roadmap for 2025, forecasting higher adjusted EBITDA margins in the second half of the year compared to the first half, with Q1 margins guided to be between 25-26%.
Additionally, Etsy’s Depop, a fashion resale platform acquired in 2021, rounded out 2024 with an accelerated Q4 GMS growth, marking its fastest pace since the acquisition. This contrasted with the broader challenges faced by Etsy, particularly in the discretionary purchase segment, which has been under pressure.
Goldman Sachs anticipates that the trajectory of Etsy’s GMS will continue to be a point of contention among investors throughout 2025, as the Q4 results largely extend the trends observed in 2024. For deeper insights into Etsy’s financial health and growth prospects, InvestingPro subscribers can access comprehensive analysis and 7 additional ProTips about the company’s performance. The firm’s stance reflects a view of Etsy operating within a difficult segment of the e-commerce market, where competition is fierce, and consumers increasingly prioritize price and delivery speed. The reaffirmed Sell rating and price target underscore the firm’s cautious outlook on Etsy’s stock for the coming year.
In other recent news, Etsy’s fourth-quarter 2024 financial results have prompted several analysts to revise their price targets for the company. Stifel has cut its target to $51, citing underwhelming Gross Merchandise Sales (GMS) and revenue, although EBITDA margins exceeded expectations. Evercore ISI reduced their target to $60, noting a mixed performance with a 3% shortfall in GMS but a stronger-than-expected take rate. BTIG also lowered its target to $60, highlighting a significant decline in core marketplace GMS and a drop in active buyers, while maintaining a Buy rating due to Etsy’s healthy free cash flow and competitive position.
Truist Securities adjusted its target to $62, pointing to lower-than-expected GMS and revenue as reflections of reduced consumer demand and strategic shifts within the company. Canaccord Genuity decreased its target to $76, acknowledging missed expectations in active buyers, GMS, and revenue, but noting that profitability surpassed estimates. Analysts from these firms have expressed varied levels of confidence in Etsy’s management and strategic initiatives, with some optimism for a stronger second half of 2025.
Etsy’s management has indicated a pivot back to near-term GMS growth, following a period focused on foundational product development. This shift is anticipated to benefit the company throughout 2025. Despite current challenges, several analysts maintain Buy ratings, suggesting potential long-term growth opportunities and an attractive entry point for investors.
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