Etsy Analysts Craft a Bullish Reaction to Fourth-Quarter Results

Etsy shares were higher after analysts crafted a largely bullish reaction to its fourth-quarter results. The online marketplace for handmade apparel and accessories also provided strong guidance and introduced its new Offsite Ads service.
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Etsy  (ETSY) - Get Report shares rose double digits after the online marketplace for handmade apparel and accessories reported stronger-than-expected fourth-quarter results, leading Wall Street analysts to publish bullish comments.

The Brooklyn, N.Y., company earned 25 cents a share in the quarter, down from 32 cents in the year-earlier quarter. Shares outstanding fell 4.4% to 123.4 million. Revenue rose 35% to near $270 million. 

A survey of analysts by FactSet produced consensus estimates of 16 cents a share of profit on $264.9 million of revenue.

At last check Etsy shares were trading up more than 10% at $55.92.

Analysts at Needham rate Etsy buy with a $64 price target. The analysts said they “anticipated a fairly strong fourth quarter and Etsy delivered.” 

While Needham was disappointed with the company’s downside margin guidance, it said the introduction of the Offsite Ads feature “changes the game for 2020.”

Meanwhile, analysts at Deutsche Bank affirmed a buy rating and raised their price target to $65 a share from $61.

Etsy’s results were “better than expected across the board,” Deutsche said. It was most impressed by the company’s forecast of between 16% and 20% growth in its gross merchandise value.

Analysts at BTIG affirmed a buy rating and $67 price target.

BTIG's expectations going into the report were tepid due to expected headwinds from California and Texas sales taxes. But “strong buyer dynamics overpowered” those headwinds, the firm said.

Offsetting the enthusiasm, Morgan Stanley affirmed an underweight rating on Etsy, though it did raise its price target to $41 from $38. 

The firm is concerned that Etsy’s cost increases will overshadow its top-line growth.

“Core 2020 gross-merchandise-sales growth was slightly better than we expected at the high end; and 2020 Ebitda margin missed our below-consensus forecast by [1 percentage point] as Etsy reinvests into upper funnel marketing, suggesting growth is coming at a higher cost,” Morgan Stanley said.