Sell-Side Analysts React To Etsy's Q3 Beat

Etsy Inc ETSY reported Tuesday with third-quarter results that put the stock on track for its best one-day performance in three years. Here's how the Street reacted to the print:

The Analyst

D.A. Davidson's Tom Forte maintains a Buy rating on Etsy with a price target lifted from $59 to $63.
Wedbush's Ygal Arounian maintains at Neutral with an unchanged $50 price target.
KeyBanc Capital Markets' Edward Yruma maintains at Overweight with an unchanged $59 price target.

DA Davidson: Shares Undervalued

Etsy's Q3 report solidifies management's efforts both big and small to improve the platform and generate "impressive" operating performance, Forte said in a research report.

Equally important is the announcement of a new $200-million share buyback program, which implies the company sees its stock as being cheap and is a sign it's able to "do more with less" equity capital, the analyst said.

Wedbush: More Work To Do

Despite multiple improvements to the platform that helped bring a 20-percent increase in gross merchandise sales in Q3, Etsy still has much work to do, Arounian said in a note. Improvements in shipping, customer service, discovery and customization are all needed for Etsy to hold a competitive advantage over its peers, the analyst said.

Despite four straight quarters of improving GMS metrics, the Q3 print failed to offer sufficient proof that buyers are flocking to the Etsy platform multiple times per year, Arounian said.

Etsy's plans for TV and digital video ads should serve as a "key test" of the company's ability to satisfy the analyst's concerns over whether consumers are making repeat visits, he said.

KeyBanc: Top Of The Class

Etsy's 20-percent GMS growth in Q3 is "very impressive," while the fourth-quarter GMS growth guidance of 17-20 percent implies an acceleration on a two-year stacked basis, Yruma said in a research report.

Revenue is projected to grow by 35-36 percent in 2018, which makes Etsy "one of the strongest growth stories" within KeyBanc's coverage, the analyst said.

Etsy's recent increase to its base take rate hasn't resulted in any negative feedback from sellers, Yruma said. Initial tests from investments in marketing are "promising," and an expansion of the project nationally should help generate margin expansion, he said.