What 3 Analysts Think About Etsy's Future Growth After Q1 Earnings Report

Analysts are reacting to the first-quarter earnings report from Etsy Inc ETSY and the second-quarter guidance for the e-commerce company.

The Etsy Analysts: Roth Capital analyst Darren Aftahi has a Buy rating and a $245 price target.

Morgan Stanley analyst Lauren Schenk has an Underweight rating and raises the price target from $123 to $135.

KeyBanc analyst Edward Yruma has a Sector Weight rating and no price target on shares.

First Quarter Strength: Etsy’s product assortment helped the company’s gross merchandise sales in the first quarter. Habitual buyers represented 9% of active buyers in the first quarter, but represented 40% of GMS.

GMS was up 132% year-over-year in the first quarter.

There are many concerns over the decline in mask sales from Etsy as sales of the COVID-19 pandemic-related item have fallen. The first quarter did see wedding-related items up 43% year-over-year, which could be a key item to watch to offset the decline in mask-related sales.

International revenue was up 169% year-over-year in the first quarter and now represents 42% of the company’s GMS. Yruma highlighted how international could make up 50% of the company’s GMS in the future.

Related Link: Thinking About Buying Stock Or Options In Twitter, Etsy, Facebook Or Badiu? 

Second Quarter Risks: Analysts have concerns for Etsy’s next fiscal quarter with it facing tough comparable to last year. Aftahi said the outlook is slowing but the story isn’t.

“We believe if Etsy can hurdle some uncertainty around platform stickiness, which it has done with habitual and repeat buyers up over 2x year-over-year, continued healthy growth rates and margins can be had as it leans into international expansion,” Aftahi said.

The market could be too optimistic about Etsy’s ability to keep up its growth, Schenk said with the deceleration worse than feared.

“We continue to believe the stock is overvalued for its sustainable level of sales growth/profitability,” Schenk said.

The decline of stimulus benefits and customers spending on experiences instead of “things” could hurt Etsy going forward, Schenk added.

“Although we like Etsy’s long-term growth opportunities, we see a lower likelihood of a near-term earnings beat, which underpins our Sector Weight rating,” Yruma said.

ETSY Price Action: Shares of Etsy Inc are down 14.57% to $157.68 at market close Thursday.

(Photo: Etsy)