Analyst: Etsy Could Make Sense For eBay, But Sale Over Near Term Is Unlikely

Activist investors TPG and Dragoneer submitted a 13D filing indicating they collectively own 8 percent of Etsy, Inc. (NASDAQ: ETSY). Earlier this month, Black-And-White Capital LP claimed 2 percent of shares outstanding.

There are indications that the investors will push the company to explore a sale, and the filings helped push Etsy shares 21 percent higher to $13.73 on Tuesday.

The company is undergoing an internal strategic and operational review under new management, making an immediate sale unlikely, according to one analyst.

Loop Capital Markets analyst Blake Harper expects a catalyst when Etsy reports its Q2 earnings in three months. The company reported Q1 results that underperformed on every metric, in part due to a significantly slower February.

The analyst lowered his rating of Etsy from Buy to Hold, while maintaining a $13 price target. Estimated revenue for FY2017 was lowered to $428.5 million (17 percent growth) and adjusted EBITDA was trimmed by almost 20 percent.

Big Name Buyers For Homemade Products

The analyst sees eBay Inc. (NASDAQ: EBAY) as a logical fit to buy Etsy given its marketplace model and scale.

Amazon.com Inc. (NASDAQ: AMZN) would be another good fit. Its Handmade at Amazon site currently has only 800,000 product listings compared to Etsy’s 45 million.

However, Harper thinks a sale is unlikely in the near-term, if at all, as online online marketplace giants will be reluctant to pay a premium for a company that has decelerating growth and needs restructuring.

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