On Monday, Oppenheimer revised its outlook on Etsy (NASDAQ: NASDAQ:ETSY) shares, reducing the price target to $80 from the prior $95, while retaining an Outperform rating. The firm's decision comes in anticipation of Etsy's earnings report, with a more cautious estimate reflecting a lack of positive signals in key performance metrics.
The analyst from Oppenheimer highlighted that the adjustment in estimates accounts for a projected two-year Gross Merchandise Sales (GMS) growth rate that ranges from a 3% decrease in the first quarter to flat growth by the fourth quarter. This conservative stance is due to an absence of momentum in important categories or in Etsy's traffic data.
Despite the broader e-commerce sector growing by 9% in the first quarter, Etsy's specific categories showed continued weakness, with U.S. Home retail sales down 11% year-over-year in the first quarter compared to a 6% decline in the previous quarter.
Etsy's site visits also experienced a downturn, with a 6% year-over-year decrease in the first quarter, following a 4% decrease in the last quarter of the previous year. Based on these observations, Oppenheimer has lowered its 2024 and 2025 estimates for Etsy's GMS, revenue, and EBITDA by 3%, and EBITDA by 5% and 4%, respectively.
The revised price target of $80 is based on a 14 times multiple of Etsy's estimated 2025 EBITDA, which represents a 25% discount compared to its peers. The report also notes that while the analyst's model now aligns with buy-side expectations, it remains 2%, 3%, and 4% below the consensus estimates for Etsy's 2024 GMS, revenue, and EBITDA.
The analyst's remarks conclude by acknowledging the potential future impact of Elliot Management's recent addition to Etsy's Board of Directors and the possible benefits from Etsy's strategic shift towards a "gifting" focus. However, the firm awaits clear evidence of these developments positively influencing Etsy's performance.
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