Tom Forte Loves Etsy Ahead Of Earnings Report: Here's Why

• Etsy Inc ETSY has seen a 62.43 percent decline in its share price year-to-date, touching a low of $10.68 on October 21.
• Brean Capital’s Tom Forte has reiterated a Buy rating on the company, with a price target of $23.
• Forte expects the company to report robust 3Q15 results, while also commenting on the entry of Amazon.com, Inc. AMZN into its territory and Etsy’s third party manufacturing initiative.

Analyst Tom Forte also believes that the pullback in the stock, following the entry of Amazon.com, has created an attractive buying opportunity.

With regard to the Q3 results, Forte expects the company to report total sales growth of 40.8 percent, with revenue of $67 million, slightly ahead of the consensus. Seller Services revenue is expected to increase 67.8 percent, with Marketplaces expanding 22.7 percent and Other growing 14 percent.

Adjusted EBITDA is, however, expected to decline 26.1 percent, as compared to a year ago, driven by advertising and headcount spend. “We acknowledge the potential risk to the stock’s short-term performance if adjusted EBITDA meets our forecast and comes in below the consensus figure,” Forte said.

However, the company is likely to post its GAAP EPS loss in-line with the consensus. According to the FBR report, active buyers are expected to have increased to 23.8 million during the quarter, with active sellers growing to 1.6 million.

“Given the entry of Amazon.com, we believe investors will place even more scrutiny on Etsy’s active seller growth quarter-to-date since the official launch of Handmade at Amazon,” the report added.