Loop's Harper Neutral On Ecommerce Marketplace Stocks

Ecommerce marketplace companies face competition from Amazon.com, Inc. AMZN, eBay Inc EBAY and Alibaba Group Holding Ltd BABA as well as potential disruption from digital wallet solutions of Apple Inc. AAPL, Alphabet Inc GOOGL and Paypal Holdings Inc PYPL.

Despite this, some companies have succeeded in niche spaces. Loop Capital Markets’ Blake Harper initiated coverage of three such stocks with Hold ratings.

Etsy

Analyst Harper mentioned that Etsy Inc ETSY had “significant opportunity” to drive revenue growth by expanding its number of buyers and its services to sellers.

Harper added that Amazon Handmade was unlikely to be a “detrimental competitive threat,” since Etsy had 70 times higher product listings. Moreover, only the largest volume sellers seemed to have moved to Amazon's platform.

“We are positive on the business in the short to medium term but believe upside to estimates is already priced in with the stock,” the analyst commented. The price target for Etsy is at $14.

Groupon
 

Groupon Inc GRPN has made significant investments for new customer acquisitions in order to boost Local growth. The company had achieved 6-8 percent Local revenue growth in North America over the past three quarters, versus the flattish trend over the past three years, Harper mentioned.

“Local revenue growth approaching double digits percentage from our forecast of 6% in 2016 and 8% in 2017, should be key to driving upside to current expectations and revaluing the stock higher,” the analyst added. He expressed concern, however, over the company’s history of “inconsistent execution and tepid growth.”

The price target for Groupon is at $6.

RetailMeNot

RetailMeNot Inc SALE is the largest player in the online coupon marketplace and has the largest mobile platform for coupons and discounts. Although the company has been focusing on improving mobile monetization, there is “further room” to expand this potential through improved ecommerce conversions, Harper noted.

“Improving monetization for both of its mobile businesses and developing new categories, such as restaurants, are potential catalysts to accelerate revenue growth,” the analyst stated. He added that the company’s mobile in-store business could generate 26-34 percent y/y revenue growth in 2016 and could reach $90-$100 million in sales in 2017, driven by new accounts.

The price target for RetailMeNot is at $11.

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