Citi Reiterates Etsy's Buy Rating Amid 16% Decline Since Q3 Results

Citi’s Mark Kelley believes the 16 percent decline in Etsy Inc ETSY shares, following Q3 2016 results, was driven by the announcement of the departure of CFO Kristina Salen in March 2017 and comments regarding a deceleration in Seller Services.

Kelley reiterated a Buy rating on the company, with a price target of $20.

Decelerating Seller Services

Management commented that a deceleration was expected in Seller Services, as Etsy had recently lapped the Paypal Holdings Inc PYPL integration that occurred in October 2015.

“We believe investors have been primarily focused on Seller Services growth and, after this exercise, believe shares have correctly recovered,” the analyst mentioned.

However, Kelley expects upside to the Q4 2016 estimates, as well as the out-year estimates and for the stock to rise toward the price target.

Upside Expected

The analyst noted that the PayPal integration increased the annual growth rate by about 30 percent for Direct Checkout to reach closer to an average of 48 percent year-on-year for the past four quarters, but was likely to return to about 28 percent year on year in Q4.

“Even taking this into account, we would not be surprised to see 4Q revenue $4-5M head of our above-street estimates, which would equate to revenue growth of +28 percent y/y vs. our currently modeled +24 percent y/y,” Kelley stated.