Brean Sees Etsy Shares 'Attractive Heading Into Quarter'

• Etsy Inc ETSY shares have lost 56 percent since August 17.
• Brean Capital’s Tom Forte maintained a Buy rating for the company, with a price target of $20.
• The company is expected to report robust 4Q15 results, with long-term margins set to expand, Forte stated.

Etsty is likely to report solid 4Q15 results, and is expected to provide updates on its mobile efforts and the impact of the strong US dollar on international GMS.

The company is likely to report total sales growth of 36.9 percent resulting in revenues of $89 million. Etsy’s Seller Services revenues, accounting for 55.6 percent of total revenues, are expected to increase 61.1 percent to $49 million. The Marketplaces revenues are expected to have grown 15.9 percent to $39 million.

Analyst Tom Forte expects Etsy’s adjusted EBITDA to have risen 37.8 percent to $13 million, despite investment spending in advertising and headcount. He said, “Regarding key metrics, we project a 24.7% increase in active buyers to 24.7MM and 19.3% gain in active sellers to 1.6MM.”

The price target of $20 is based on Etsy’s long-term adjusted EBITDA margins increasing from 11.8 percent in 2014 to 23 percent, Forte mentioned. He believes that future revenue growth will be driven by Etsy’s ability to build local market places, globally.

The company intends to deepen its local ecosystems, which includes buyers and sellers with expertise in local language, merchandising, payments and shipping, in key markets and aim for better international monetization.