Citi Says Don't Buy Etsy Shares Here

Shares of Etsy Inc ETSY hit an all-time low of $8.40 immediately following the company's earnings report in early May. But the stock quickly rebounded as investors become optimistic that an activist investor campaign and a new management slate could result in a potential sale of itself.

Wait And See

But with shares trading north of $13 per share on Wednesday, analysts at Citi aren't prepared to recommend investors accumulate new positions in Etsy's stock.

Citi's Mark Kelley commented in a research report that he isn't optimistic that Etsy will sell itself in the near term. But investors who already own the stock shouldn't necessarily look to sell; the analyst thinks Etsy could fetch a price tag of $21 to $22 per share in any eventual sale.

However, Kelley also thinks that as a standalone entity Etsy is worth just $7 per share; operating alone implies little to no improvement in operational performance.

Justification For The Downgrade

As such, the analyst is downgrading Etsy's stock rating from Buy to Neutral with a $14 price target, which is in line with its last 12-months average and comps.

Bottom line, Kelley argued that "the market is hoping for near-term M&A but holding on to this thinking could disappoint investors."

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