KeyBanc Optimistic On Etsy's Long-Term Growth After Meeting CEO

Recent discussion with Etsy Inc ETSY CEO Josh Silverman highlighted the company’s long-term growth opportunity, although there are both tailwinds and headwinds in the near term, according to KeyBanc Capital Markets.

The Analyst

KeyBanc’s Edward Yruma maintained an Overweight rating on Etsy and a price target of $90.

The Thesis

Although adoption of free shipping is likely to translate to both tailwinds and headwinds for Etsy in the near term, this would be a key growth driver in the company’s Gross Merchandise Sales (GMS) in the longer term, Yruma said.

He added that recent discussion with CEO Josh Silverman gave more confidence on Etsy’s long-term growth opportunity.

Changes to search and listing are already underway. Etsy prioritizing free shipping over conversion in listing could result in some near-term headwinds, the analyst explained. He added, however, that these would normalize as adoption increases.

“Baskets close to the $35 free shipping threshold tend to see incremental purchases in an effort to hit the hurdle,” Yruma wrote in the note.

The acquisition of Reverb is relatively low risk and “demonstrates the extensibility” of Etsy’s operating model and that the company could become a preferred acquirer, Yruma mentioned, while adding that Etsy had already deployed its internal engineering talent to augment the Reverb team.

Price Action

Shares of Etsy were up 1.02% at $54.46 at the time of publishing on Thursday.

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