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Etsy Poised for Durable Growth Amid Better-Than-Expected Strategy Execution, BofA Says in Upgrade

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Etsy Poised for Durable Growth Amid Better-Than-Expected Strategy Execution, BofA Says in Upgrade

Etsy (ETSY) is positioned for durable growth amid better-than-projected strategy execution and as third-party data continue to imply "conservative" guidance, BofA Securities said Thursday.

The brokerage raised its 2027 non-GAAP earnings outlook for the online marketplace to $6.38 a share from $5.91 and its Etsy Marketplace gross merchandise sales, or GMS, growth estimate to 4.5% from 3%. GMS measures the total dollar amount of items sold on the platform.

"Execution under (Chief Executive) Kruti Patel Goyal's four growth pillars appears more durable than expected, and recent (third-party) data continues to imply conservative guidance," BofA analyst Michael McGovern said in a note to clients.

The four pillars are the platform showing up where shoppers discover, better matching and personalization, loyalty, and human connection, according to the note.

BofA upgraded its rating on the Etsy stock to buy from neutral and raised its price objective to $105 from $88.

"We think conservative estimates and an underappreciated capital-return story leave meaningful upside potential from here," McGovern said. "We are raising estimates further above (Wall) Street to reflect what we believe is durable growth, and improved potential efficiency post-(reduction in force)."

Etsy shares were up 1.8% in Thursday afternoon trade. The stock has jumped nearly 48% so far this year.

Earlier in the month, the company said it will reduce its marketplace workforce by 220 employees as part of a restructuring plan. Late last month, Etsy completed the sale of consumer-to-consumer fashion marketplace Depop to eBay (EBAY).

"(Etsy's) growth looks increasingly structural rather than a spike, with more than $1 (billion) of dry powder for capital returns from the Depop sale providing a meaningful (earnings-per-share) tailwind," McGovern said Thursday. "Mobile app gains are creating richer buyer profiles, improving personalization and marketing efficiency, which reinforces both conversion and (lifetime value)."

Earlier this month, Etsy raised its full-year GMS growth outlook to the mid-single-digit range.

"We believe that higher GMS and revenue growth sustained over time can create far greater absolute cash flow and shareholder value than can margin expansion alone," Chief Financial Officer Lanny Baker on an earnings conference call at the time, according to a FactSet transcript.

Price: $81.96, Change: $+1.50, Percent Change: +1.86%

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