Etsy valuation at a discount to pre-pandemic levels despite being stronger

By Sam Boughedda 

Needham & Company upgraded shares of Etsy (NASDAQ:) to Buy from Hold, assigning the stock a $160 per share price target in a note to clients on Wednesday.

Needham analysts explained that the company exited the pandemic stronger, but its valuation is at a discount to pre-pandemic averages.

“ETSY has done a commendable job holding on to pandemic buyers in ’22, when reopening headwinds were significant–since ’19, repeat buyer penetration is up 800 bps, while habitual buyers increased by over 200% and reactivated buyers are up ~900k y/y YTD (and company now has better tools to reactivate ~100M buyers lapsed in the last 12-18 months),” argue the analysts. “While macro overhang remains, we think Etsy’s secret sauce is diversification of categories and relative value prop–with ecomm penetration expected to bounce back in ’23, we think ETSY should be gaining share again.”

They added that, since 2020, Etsy’s product development is up over 120% while sales are up 50%.

“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,” the analysts concluded.

Etsy shares are up 1.9% at the time of writing.