Questions about the total addressable market, macroeconomic pressures, and a post-COVID pullback in consumer spending are key reasons to remain cautious on Etsy (NASDAQ:ETSY), according to Barclays.
In a note initiating coverage at a Hold-equivalent rating on Monday, equity analyst Trevor Young commented that strong margins, growth into men’s categories, and expansion from its niche fashion domain are encouraging. However, those positives are counteracted by the “double whammy” of Covid pull-forward and a weakening macro backdrop. Further, there are questions about the platform’s ability to impress fees on merchants, especially as sellers push back more vocally on the high fees.
“We do think ETSY can outpace overall e-comm growth and revenue can grow even faster as the company offers more features to sellers, but at some point competitive pressures likely cap take rate progression,” he explained. “A solid balance sheet, strong FCF generation and trough
valuation bolster a bull case, but the lower growth profile and range-bound margin suggests that shares are probably priced right for the current environment.”
Young assigned a $100 price target to shares alongside the “Equal Weight” rating on shares. Shares closed at $119.91 on Friday.
Read more on concerns emerging in regard to overall retail spending.