As Active Buyer Growth Reaccelerates, This E-Commerce Stock Can Get A Boost

The Piper Sandler investment bank is becoming bullish on Etsy stock, predicting that it will grow well in the months to come, as long as it gets good news from the government.

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The company's shares were upgraded from neutral to overweight by analyst Edward Yruma, who said in a note to clients on Tuesday that recent survey findings reaffirm Etsy's ability to attract new active buyers and gain share growth is likely to accelerate its growth.

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There was a 3.4% rise in the stock before the bell rang. In the past year, the shares are down 9.6%, as compared to a 45% drop in 2022 when the shares plunged by 45.6%.

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In addition to Etsy's momentum among younger generations, Yruma discussed the company's success in reactivating some lapsed buyers - a number that has reached a record 24 million in the last year - as additional strength for Etsy, given its focus on values like sustainability and reactivation of the lapsed buyer pool.

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He wrote, “Even though macro remains choppy, the company is one of the highest quality names we are covering given its 28% EBITDA margin [last 12 months] and long-term growth prospects."

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The analyst additionally views the shares of the company as reasonably priced, noting that they trade close to their trough valuation and at a significant discount to the enterprise value-to-EBITDA ratio that has been averaged for the company over the past four years.

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There is a probable upside of about 29% from Monday's close in terms of Yruma's price target on shares, which has been raised from $135 to $140.

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The analyst noted though that macroeconomic conditions are still pressured and consumer spending is tipped to a lower side at this point, the company has growth company characteristics at what is called a GARP valuation.

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