Wall Street Reacts To Etsy's Q4 Beat

Shares of Etsy Inc ETSY soared Wednesday after the company's fourth-quarter earnings report came in ahead of expectations, and metrics like gross merchandise sales similarly impressed the Street.

Wall Street's Ratings, Price Target Changes

• Stifel's Scott Devitt maintains a Hold rating on Etsy's stock with a price target boosted from $18 to $24.
• Roth Capital Partners' Darren Aftahi upgraded Etsy's stock rating from Neutral to Buy with a price target boosted from $20.50 to $28.
• KeyBanc Capital Markets' Edward Yruma maintains an Overweight rating on Etsy's stock with a price target raised from $26 to $28.

Stifel: Opportunity Is Priced In

Etsy's "impressive" Q4 report was highlighted by 17.8-percent year-over-year GMV growth, Devitt said in a note. The quarterly report signals that Etsy continues to benefit from new features and products on its platforms, along with stronger marketing capabilities and search improvements, the analyst said. 

Etsy's print also marks the third consecutive quarter of accelerating revenue growth and the second quarter of record high adjusted EBITDA margins, Devitt said.

Encouragingly, Etsy said its momentum is still in the "early stages" and that it faces multiple growth opportunities ahead. But the online marketplace's stock already prices in Etsy's long-term opportunity, so a neutral stance is appropriate, according to Stifel.  

Related Link: Why 'The World Needs Etsy More Than Ever'

Roth: Further Acceleration Ahead

Etsy's Q4 was solid and highlighted by GMS growing 18 percent from one year ago, exceeding $1 billion for the first time, Aftahi said in the upgrade note. The company benefited from a strong holiday season, including its first-ever holiday site sale and improvements to the platform like promoted listings, he said. 

Gross margins in the quarter also improved from a year ago due to lower payment processing fees, and while operating expenses grew around 6 percent, they were lower by 900 basis points as a percentage of revenue, the analyst said. 

Bottom line, the company's clear momentum from recent initiatives is not only sustainable, but could further accelerate, according to Roth Capital Partners. 

KeyBanc: A Better Platform

Etsy's Q4 makes clear that the Etsy platform is now a "better place to sell" and a"better place to shop," Yruma said in a research report. Buyers are now more attracted to the platform given the company's focus on search and use of artificial intelligence to better understand what people want to buy, Yruma said.

Similarly, Etsy's Seller Services and algorithm improvements result in sellers being better able to advertise "the correct item" to relevant buyers, the analyst said. 

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Photo courtesy of Etsy.