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On Tuesday, JPMorgan analyst Bryan Smilek revised the price target for Etsy (NASDAQ:ETSY) shares, reducing it to $42.00 from the previous target of $50.00, while maintaining a Neutral rating on the stock. The new target sits close to Etsy's current trading price of $43.64, with the stock recently hitting near its 52-week low of $41.48. Smilek's assessment followed a report published on April 2, which highlighted the limited direct exposure of Etsy to tariffs from Canada, Mexico, and China, as less than 5% of Gross Merchandise Sales (GMS) are from U.S. buyers purchasing from these regions.InvestingPro analysis suggests Etsy appears undervalued at current levels, with additional insights available in the comprehensive Pro Research Report, which provides deep-dive analysis of what really matters for this $4.67 billion market cap company.
Etsy's marketplace is primarily composed of sellers who source their supplies domestically, with around 90% of sellers fitting this profile. Additionally, a significant portion of the company's GMS in 2024, approximately 74%, was attributed to U.S. buyers. The company maintains impressive gross profit margins of 72.42%, highlighting its efficient marketplace model. Despite the minor direct impact of North American and Chinese tariffs, Etsy faces a more substantial challenge from European tariffs due to approximately 28% of global Etsy sellers exporting goods internationally, including to the U.S.
Smilek suggests that Etsy could leverage domestic sales promotion to mitigate the effects of tariffs. However, broader concerns such as potential demand headwinds due to softer consumer spending and sentiment were noted, which could be exacerbated if sellers increase prices to offset higher costs. This trend has been observed across multiple sectors, including retail, airlines, and advertising, with companies reporting softer trends in recent weeks.
The analysis also referenced Chase Card data, indicating that card-not-present (CNP) growth remained stable year-over-year in the first quarter at +9%. However, discretionary CNP spending, which is seen as a key indicator for Etsy's demand trends, showed a deceleration throughout the quarter. Investors should note that Etsy's next earnings report is scheduled for April 30, 2025, where these trends will be closely monitored.InvestingPro subscribers have access to 12 additional key insights about Etsy, including detailed analysis of its financial health, cash flow metrics, and growth potential. The platform's comprehensive Pro Research Report provides actionable intelligence for smarter investment decisions.
Despite these challenges, Smilek identified potential positives, such as increased tariffs on Asian retailers and the end of the de minimis trade exemption for China/Hong Kong exports beginning May 2, which could reduce competition for Etsy. Nevertheless, JPMorgan has adjusted its 2025 projections for Etsy, estimating a decline in Consolidated GMS by approximately 4% and an adjustment to EBITDA projections by roughly 5%. The projected Consolidated GMS is expected to decrease by -8% FXN year-over-year in 2025, with Etsy Marketplace GMS anticipated to fall by -9% FXN year-over-year. Adjusted EBITDA margins are projected at 27.0%, a decrease of 80 basis points year-over-year. The revised December 2025 price target is based on an estimated 9x 2026E Free Cash Flow of $706 million.
In other recent news, Etsy has been the focus of several analyst assessments and corporate announcements. Etsy's fourth-quarter Gross Merchandise Sales (GMS) fell short of expectations by approximately 3%, leading Guggenheim to lower its price target from $80 to $70 while maintaining a Buy rating. Similarly, Cantor Fitzgerald reduced its price target to $43, citing uncertainties in Etsy's 2025 outlook, despite the company's earnings before interest, taxes, depreciation, and amortization (EBITDA) surpassing estimates by 2%. Loop Capital also reiterated a Sell rating with a $40 target, pointing to a decline in GMS and a slowdown in new buyer acquisition.
Additionally, JPMorgan maintained a Neutral rating with a $50 price target, expressing caution over potential tariff impacts despite Etsy's limited direct exposure. In corporate news, Etsy announced the appointment of Rafe Colburn as Chief Technology Officer, effective May 5, 2025. Colburn returns to Etsy after a decade, bringing experience from his role as Chief Technology & Product Officer at Depop. Etsy's CEO, Josh Silverman, expressed confidence in Colburn's ability to enhance the company's technical strategy. These developments come as Etsy continues to navigate a competitive and rapidly changing market environment.
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