Etsy Falls as Long-Time KeyBanc Bull Turns Neutral

KeyBanc downgraded Etsy to sector perform from outperform on valuation concerns.
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Shares of online retailer Etsy  (ETSY) - Get Report dropped premarket Monday after a KeyBanc analyst reversed his long-held bullish view on the company, downgrading it to sector weight from overweight. 

Analyst Edward Yruma changed his outlook on the company citing valuation and a lower near-term likelihood of positive earnings revisions.

"We believe Etsy remains one of the best long-term growth opportunities in our coverage. However, we move to sector weight given what we view as a fair valuation and lower likelihood of near-term beats," Yruma said. 

Yruma noted that Etsy has outperformed the broader market by a wide margin since KeyBanc first set an outperform rating on the company in October 2017. Currently however, the stock's valuation looks "fair" and the current consensus analyst expectations look "reasonable."

KeyBanc previously called 2020 the "banner year" for Etsy and said it should prove an important inflection point for the company.

Etsy shares were down 1.8% to $210.75 per share at last check premarket Monday. 

Etsy has reached multiple all-time highs in recent months amid record sales thanks in part to the coronavirus pandemic that helped boost online retail for the past year. The stock is up 241% over the last 12 months and almost 21% year to date. 

The company’s revenue doubled to $1.1 billion in the first nine months of 2020 from the year-earlier period.

In February, Etsy reported fourth-quarter net income quadrupled to $149 million, or $1.08 a share, from $31 million, or 25 cents a share, in the year-earlier quarter. Revenue more than doubled to $617 million from $270 million.

A survey of analysts by FactSet produced consensus estimates of 59 cents a share of profit on revenue of $516 million for the first quarter.