BTIG Research: Etsy Is Online Leader In Handmade, Artisanal Goods

Etsy Inc ETSY may be one of few online players that has "gotten the best of Amazon.com, Inc. AMZN," according to BTIG Research. 

The Analyst 

Analyst Marvin Fong initiated coverage of Etsy with a Buy rating and $59 price target.

The Thesis

Etsy delivered a third-quarter earnings beat last week that triggered a 30-percent gain in the stock. 

The e-commerce site earned 15 cents per share, more than doubling the estimate of 7 cents. Etsy shares are now up over 130 percent year-to-date.

Etsy has among the best fundamentals in the digital marketplace space and is positioned to continue leading the online handmade and artisanal space, Fong said. 

Etsy has numerous growth drivers, Fong said: 

• Promoted listings revenue could roughly triple over the next five years, as advertisers have leeway to spend more before economics top out.
• Etsy has opportunity in adding new international services and markets and bridging its 25-percent gap in seller monetization vs. the U.S. 
• Bringing mobile web conversion to desktop levels, which BTIG sees as a $700 to $800-million GMS opportunity. 
• Etsy still has room for transaction fees to rise, as they remain meaningfully below the competition. 

Etsy has an untapped base of dormant buyers, Fong said. 

“Our proprietary cohort model suggests there are 32 million inactive users, not far from the size of the current active user base. We estimate 5 percent of re-activated buyers would generate $160 million of GMS." 

Etsy is increasing its paid marketing by 40 percent this year in an effort to bring more awareness to the marketplace’s product offerings, the analyst said. 

The Price Action

Etsy shares were up 0.17 percent at $47.43 at the time of publication Wednesday. 

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Photo courtesy of Etsy.