Etsy (ETSY) delivered its strongest core gross merchandise sales growth since 2021 in Q2, reinforcing its growth potential, though a sustained recovery will depend on a meaningful increase in buyer purchase frequency, Morgan Stanley said in a note late Thursday.
The company guided for about 4% to 6% Q3 GMS growth, raised the low end of its 2026 adjusted earnings before interest, taxes, depreciation and amortization margin outlook by about 100 basis points, and authorized a roughly $2 billion share repurchase program that the brokerage said will likely to utilized over the next 12 to 18 months.
Morgan Stanley said the bullish case for Etsy is that it has emerged from its post-pandemic slowdown, with improving buyer trends, lower churn and AI-driven product discovery supporting stronger long-term GMS growth and profitability.
The brokerage said the bear case is that Etsy's recent growth has been driven mainly by favorable industry conditions, while buyer purchase frequency remains below year-ago levels, raising the risk of slower GMS growth in 2027 as tailwinds fade.
Morgan Stanley maintained its equal weight rating on the stock and raised its price target to $73 from $64.
Etsy shares were up 3.1% in Friday trading.
Price: $84.83, Change: $+2.57, Percent Change: +3.12%