Wells Fargo analyst Ken Gawrelski maintained a Sell rating on Etsy (ETSY – Research Report) yesterday and set a price target of $47.00.
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Ken Gawrelski has given his Sell rating due to a combination of factors, primarily focusing on Etsy’s strategic shift and its impact on financial performance. Etsy’s management has prioritized investments in growth recovery over maintaining margins, which has led to a projected year-over-year decrease in margins by approximately 30 basis points in 2025. The company’s guidance for the first quarter of 2025 indicates no quarter-over-quarter improvement in Gross Merchandise Sales (GMS), and while there was some improvement in December, the overall growth trend remains stable without significant upward momentum.
Concerns also arise from a notable decline in active buyers in the fourth quarter, despite a substantial increase in performance marketing expenditures. This disconnect between increased marketing spending and the reduction in active buyers suggests challenges in achieving sustainable GMS growth. Additionally, while Etsy has made investments in AI talent and engineering, which are expected to impact margins negatively, there remains uncertainty about the exact positioning of 2025 EBITDA margins. These factors, coupled with a reduction in estimates for active buyers and GMS, have influenced the Sell rating, despite a slight increase in the price target to $47.