Analyst: Etsy Could Make Sense For eBay, But Sale Over Near Term Is Unlikely

Activist investors TPG and Dragoneer submitted a 13D filing indicating they collectively own 8 percent of Etsy, Inc. ETSY. Earlier this month, Black-And-White Capital LP claimed 2 percent of shares outstanding.

There are indications that the investors will push the company to explore a sale, and the filings helped push Etsy shares 21 percent higher to $13.73 on Tuesday.

The company is undergoing an internal strategic and operational review under new management, making an immediate sale unlikely, according to one analyst.

Loop Capital Markets analyst Blake Harper expects a catalyst when Etsy reports its Q2 earnings in three months. The company reported Q1 results that underperformed on every metric, in part due to a significantly slower February.

The analyst lowered his rating of Etsy from Buy to Hold, while maintaining a $13 price target. Estimated revenue for FY2017 was lowered to $428.5 million (17 percent growth) and adjusted EBITDA was trimmed by almost 20 percent.

Big Name Buyers For Homemade Products

The analyst sees eBay Inc. EBAY as a logical fit to buy Etsy given its marketplace model and scale.

Amazon.com Inc. AMZN would be another good fit. Its Handmade at Amazon site currently has only 800,000 product listings compared to Etsy’s 45 million.

However, Harper thinks a sale is unlikely in the near-term, if at all, as online online marketplace giants will be reluctant to pay a premium for a company that has decelerating growth and needs restructuring.

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