Needham turned constructive on Etsy ( NASDAQ: ETSY ) with an upgrade on Wednesday on the online retailer to a Buy rating from Hold.
Analyst Anna Andeeva and team think multiple contraction drove most of ETSY's share underperformance in 2022. However, valuation is now noted to be below the 2018-2019 levels and Etsy's ( ETSY ) model is seen proving to be sticky in keeping pandemic gains.
"Now that pandemic demand has been mostly lapped and sell side estimates are in a good place (we expect a conservative 1Q23 guide, albeit buy-side is already there, and compares ease significantly thereafter), positive earnings revisions and multiple expansion should drive share upside from here."
Looking ahead, Etsy ( ETSY ) is said to still be in the early innings of various product and marketing initiatives to engage and retain the buyers and sellers, which is expected to improve visibility, awareness and mind-share among consumers and lead to GMS growth and profitability gains for years to come.
Needham assigned a price target of $160 to Etsy ( ETSY ), which implies multiples of 8X EV/Sales and 30X EV/EBITDA on the firm's respective 2023 estimates. The bull case PT of $200 assumes sales growth bounces back to double digits in 2023 and the stock trades at a 10X EV/Sales multiple on the 2023 estimate
Shares of Etsy ( ETSY ) rose 2.70% premarket on Wednesday to $116.63 vs. the 52-week trading range of $67.01 to $200.00.
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Etsy gains after Needham points to attractive valuation in bull call