On Thursday, Evercore ISI adjusted its price target for Etsy (NASDAQ:ETSY), the online marketplace, from $90.00 to $80.00 while retaining an Outperform rating on the stock. This revision follows the company's first-quarter earnings report, which aligned with analyst expectations in several key areas but showed a slight decline in Gross Merchandise Sales (GMS).
Etsy reported a revenue of $646 million and an EBITDA of $168 million for the first quarter, matching Evercore ISI and broader market predictions. The EBITDA margin hit the target at 26.0%, as forecasted. However, the GMS, totaling $3.0 billion, fell short by 1% compared to Street estimates. Despite this, the marketplace saw modest outperformance, and the consolidated take rate of 21.6% slightly exceeded expectations.
The company's guidance for the second quarter indicated a low single to mid-single digit percentage year-over-year decline in GMS, which was below the flat year-over-year GMS that analysts had anticipated. Management maintained its full-year take rate and margin guidance but now suggests a more significant acceleration of GMS towards the end of the year, compared to previous forecasts. This change is attributed to ongoing macroeconomic challenges and the early stages of new product rollouts.
Evercore ISI noted the stock's 12% drop in after-market trading, which might reflect some degree of investor capitulation. Analysts pointed to the weak macro environment, competitive pressures, and an unproven product cycle as risks. Despite these challenges, Evercore ISI believes the risk/reward profile for Etsy is becoming more attractive, citing the stock's valuation at 10 times the firm's estimated 2025 EBITDA on depressed growth and margins.
They also highlighted management's conservative full-year GMS outlook, which does not rely on a significant macroeconomic recovery, and a robust product roadmap that could enhance user engagement and buyer conversion. Consequently, the firm remains patient with its Outperform rating.
InvestingPro Insights
Following the recent financial report and Evercore ISI's price target adjustment for Etsy, investors may find additional context through real-time data and insights. According to InvestingPro, Etsy's management has been actively repurchasing shares, signaling confidence in the company's value. Moreover, Etsy boasts impressive gross profit margins, which were reported at 70.41% for the last twelve months as of Q1 2024. This aligns with Evercore ISI's recognition of Etsy's strong EBITDA margin in their analysis.
On the financial metrics front, Etsy's market capitalization stands at $8.18 billion, with a P/E ratio of 28.43, which adjusts to 21.48 when considering the last twelve months as of Q1 2024. This suggests that the company is trading at a lower P/E ratio relative to near-term earnings growth, an aspect that Evercore ISI finds attractive in terms of valuation. Additionally, the PEG ratio for the same period is notably low at 0.19, indicating potential for growth relative to earnings expectations.
For those seeking further guidance, InvestingPro offers a range of additional tips, including insights on Etsy's debt levels, liquidity, and profitability. In total, there are 11 more InvestingPro Tips available for Etsy, which can be accessed through the dedicated InvestingPro platform. For readers interested in a deeper dive into Etsy's financial health and future prospects, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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