3 Etsy Analysts On Q2 Earnings, 'Softer Than Expected' Q3 Guidance

Etsy analysts are reacting to the e-commerce platform's second-quarter earnings report and third-quarter guidance.

The Etsy Analysts: Roth Capital analyst Darren Aftahi downgraded Etsy Inc ETSY from Buy to Neutral and lowered the price target from $245 to $180.

Neddham analyst Anna Andreeva has a Buy rating and $250 price target.

Morgan Stanley analyst Lauren Schenk upgraded Etsy from Underweight to Equal-weight and raised the price target from $135 to $163.

Etsy Q2 Earnings Reactions: Etsy shares fell by double digits in after-hours trading Wednesday after reporting second-quarter financials.

“While the business is healthy and a slowdown in growth was expected given the entrance of COVID comps, 3Q guidance was softer than expected,” Aftahi said.

The analyst said it will be hard for accelerated growth to happen again for Etsy.

Etsy’s long-term growth story hasn’t changed, according to Andreeva, who saw strong revenue growth for Etsy in the second quarter despite the number of new buyers declining.

“Pandemic buyers appear to be at least as valuable as pre-pandemic, retention initiatives are working and higher margin services continue to grow,” Andreeva said.

Etsy’s second quarter saw stronger top-line growth than expected by Schenk, who was previously Underweight on the stock.

“We underestimated the structural tailwind COVID would bring to the business, ETSY’s ability to attract a wider audience and TAM and grow its active customer base,” Schenk said.

Related Link: Why Etsy's Shares Are Falling On Quarterly Earnings 

Etsy's Acquisitions: Aftahi said the third-quarter guidance is soft despite two recently announced acquisitions.

The acquisition of Depop is a highlight for Andreeva, who sees the business accelerating in fiscal 2022 as it scales in the United States.

“We are modeling sales up +50% for 2021, following +100% in 2020,” Andreeva said of Depop. Cost savings and synergies could come from Depop as well, the analyst notes.

Etsy has acquired four companies in the last three years, and two recently announced deals are bullish for the Morgan Stanley analyst.

“ETSY’s M&A strategy has become a more meaningful piece of the story,” Schenk said. Etsy’s “house of brands” strategy could continue to be a growth driver, Schenk added.

What’s Next For Etsy: Etsy’s guidance shows a “further deceleration of growth” according to Aftahi. The analyst sees the company’s core business growing 9% with masks and 18% year-over-year without masks.

Andreeva calls Etsy’s guidance conservative and thinks the company could beat the new expected number.

The drop in the price for Etsy’s shares created a “balanced risk/reward” for Schenk. Etsy trades at 10x expected 2022 revenues, which provides a good valuation for the analyst.

Schenk calls Etsy’s guidance “more realistic than conservative.”

ETSY Price Action: ETSY shares lost 9.74% in Thursday's session, closing at $182.41. 

Photo: courtesy of Etsy.