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Investing.com - Morgan Stanley (NYSE:MS) upgraded Etsy (NASDAQ:ETSY) from Underweight to Equalweight on Monday, raising its price target to $50.00 from $38.00. The e-commerce platform, currently trading at $59.64, maintains impressive gross profit margins of 72.3% and shows strong financial health according to InvestingPro metrics.
The upgrade follows what Morgan Stanley described as the realization of its previous thesis that favored eBay (NASDAQ:EBAY) over Etsy based on expectations of converging valuations due to divergent revenue growth.
Morgan Stanley noted that Etsy’s enterprise value to EBITDA ratio has shifted from a roughly 54% premium to approximately a 20% discount compared to eBay, reflecting the market’s response to fundamental performance differences.
The firm pointed out that Etsy has underperformed the S&P by approximately 20% while eBay has outperformed by roughly 30% over the past year, with eBay growing more than 10 percentage points faster in the first quarter.
Despite the upgrade, Morgan Stanley expressed continued long-term caution regarding Etsy’s ability to drive user frequency, but now sees "a more balanced risk-reward in the near term with a wide bull-bear spread."
In other recent news, Etsy has announced the pricing of $650 million in convertible senior notes due 2030, with a 1.00% interest rate. The company plans to use part of the proceeds, up to $175 million, to repurchase its common stock, while the remaining funds will be directed toward general corporate purposes, potentially including the repayment of existing debt. Truist Securities has raised its price target for Etsy to $60, citing positive growth data and an increase in Marketplace revenue, which is tracking ahead of consensus estimates. The firm also highlighted an acceleration in monthly active user growth, reaching a 22-month high. Meanwhile, Citizens JMP has maintained its Market Perform rating on Etsy, noting the competitive pressures in the retail space despite the company’s strong merchandise capabilities. The convertible notes offering and stock repurchase plan are part of Etsy’s broader strategy to manage market challenges and optimize its financial position. The notes will be convertible into cash, Etsy common stock, or a combination of both, and Etsy retains the discretion to redeem them under certain conditions after June 2028. These recent developments reflect Etsy’s ongoing efforts to navigate a competitive market environment while leveraging its unique strengths.
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