Etsy's Sale Of Brazilian Marketplace Elo7 Will Sharpen Its Focus, Says Analyst

Needham analyst Anna Andreeva reiterated a Buy rating on the shares of Etsy Inc ETSY with a price target of $130.

Today ETSY announced the sale of its Brazilian marketplace Elo7 without disclosing any terms of the deal.

ETSY acquired Elo in June 2021 for $217 million.

Similar to social e-commerce company Depop, the analyst believes Elo7's take rate was much below that of Etsy (10-12%; 7% selling fee vs. 10% at Depop).

While management has sounded more constructive on post-Covid performance vs. Depop, selling money-losing subsidiary eliminates a drag to overall profitability and more importantly sharpens the company's focus on what's working. 

The analyst also views Depop staying as part of the portfolio as a potential signal that investments company has been making in the brand are starting to bear fruit.

ETSY exited the pandemic as a stronger company, keeping 90%+ of pandemic buyers in '22 despite challenging compared with the reopening and a tough consumer tape. 

The analyst expects Etsy's 2Q23 earnings inline and consensus modeling 3Q23 GMS +3% and EBITDA margins at 27.4% look appropriate.

Price Action: ETSY shares are trading higher by 0.71% at $94.07 on the last check Tuesday.