Etsy Shares Fall After Jefferies Double Downgrade: What Investors Need To Know

Etsy Inc ETSY shares are trading lower Thursday morning after Jefferies downgraded the stock from Buy to Underperform.

Analysts lowered their price target from $150 to $85, citing concerns surrounding deteriorating spend by buyers on the platform.

As a result of increased buyer churn and decreased buyer spending, Etsy is forced to spend more on marketing and this ultimately will put pressure on EBITDA, Jefferies analysts said. 

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Jefferies expects Etsy's marketing to remain elevated in response to churn, which results in only modest margin expansion over time.

As a result, Etsy may see a premium multiple depression in response to tempered growth and growth expectations.

With $13.3 billion in 2022 consolidated gross merchandise volume, Brooklyn, New York-based Etsy has cemented itself as one of the largest players in a quickly growing space. It generates revenue from listing fees, commissions on sold items, advertising services, payment processing, and shipping labels.

Rising interest rates and fears of a recession have meanwhile loomed over tech companies and consumer discretionary firms like Etsy, which has seen shares fall roughly 25% over the trailing year.

When interest rates rise, the value of future cash flows is reduced for growth stocks like Etsy, which in turn lower the value of the stock.

Etsy shares are trading lower by some 3.56% to $109.15 at publication time. 

According to data from Benzinga Pro, Etsy has a 52-week high of $151.50 and a 52-week low of $67.01.

Next: What 18 Other Etsy Analysts Say