Shares of the Brooklyn, N.Y., company, which was recently added to the S&P 500, were at last check up 2.7% to $113.52.
BTIG analyst Marvin Fong upgraded Etsy to buy from neutral with a $138 price target.
Fong said the stock's 22% pullback "brings its valuation into historical range."
The analyst called Etsy "one of the fastest growing and best run companies in e-commerce." He said that based on his tracking, the company's August growth was robust.
Jefferies analyst John Colantuoni, who keeps a buy rating and $163 price target on the company, said that Etsy's stock is down about 18% since peaking at $136 in early August.
Etsy has "notably [underperformed] the broader tech space (Nasdaq down 1%) during the same period," the analyst said.
"[The] selloff provides a compelling buying opportunity, particularly with recent traffic and search trends suggesting another third-quarter beat," the analyst said in a note to clients.
Colantuoni said his price target remained at $163 "due to modestly lower peer valuation."
"Our analysis of traffic and search trends so far in the third quarter suggest Etsy's elevated top-line growth remains unabated, supporting our view that the pandemic has driven a permanent uplift in online consumption, particularly in categories related to home nesting where the company is particularly strong," Colantuoni said.
The coronavirus pandemic has forced many consumers to increase their online shopping to avoid crowds and comply with social distancing requirements.
Colantuoni raised his third-quarter estimate of gross merchandise sales to 2% above the high end of guidance.
"Underlying gross-merchandise-sales growth continues to exceed 30%, driven by top/mid funnel marketing spending, continued growth in paid marketing, and higher conversion from more free shipping," he said.