Goldman starts Etsy with a buy rating, sees it as more resilient than other retailers in a recession
The online marketplace Etsy is a good investment, according to Goldman Sachs, at a time when most in the broader retail sector are struggling. Analyst Alexandra Steiger initiated a buy rating with a price target of $130, an upside of 17.7% from the last close. The bank forecasts a 15% compound annual revenue growth over five years mainly driven by a 13% increase in gross merchandise sales. "Post COVID, Etsy's marketplace model has shown a great level of resiliency relative to many of its eCommerce peers and in the face of ongoing macro headwinds," she said. Many e-commerce and brick-and-mortar retail companies are struggling this year as they cut prices and implement other promotions to move gluts of inventory. Supply chain issues have begun to work themselves out, leading to increased production levels and newly fulfilled backorders at the same time consumers shift spending coming out of the pandemic from goods to services and become more money conscious amid inflationary pressures. But Etsy is untraditional as it is simply a platform for buyers and sellers of goods to connect. To be sure, sellers would likely be impacted by those same supply and demand challenges, but the company itself has more shield than one that needs to buy product, Steiger said. Steiger also noted Etsy is slowly broadening scope through acquisitions Depop and Elo7, with enough cash flow to continue absorbing other online marketplaces. She noted a continued slide in overall consumer spending would likely still impact the company, though Etsy and other scaled platforms are more defensive. Even amid macro headwinds, the marketplace is poised to more than double its global market penetration excluding China by 2026, she said. "We also believe that the network effects enjoyed by Etsy are made more defensible by its skew towards unique supply/inventory (within a vast pool of ~100mm active listings) helping mitigate substitution effects and lowering the risk of like-for-like wallet share losses to competing platforms," she said. Shares of Etsy are down nearly 50% this year. — CNBC's Michael Bloom contributed to this report.