A Look at Valuations and Analyst Ratings for Etsy Stock

Victoria Dean - Author

May 3 2018, Updated 9:04 a.m. ET

PE valuation

On April 30, Etsy (ETSY) was trading at a 12-month forward PE (price-to-earnings) ratio of 68.6x. Following its 4Q17 results, its valuation multiple has increased 4.0%.

Comparing the forward PE (the stock price divided by analysts’ earnings estimates for the upcoming four quarters) valuation multiples for companies in the same sector can help investors make investment decisions regarding a particular stock.

Etsy is trading at a higher valuation multiple than its larger peers. eBay (EBAY) and Alibaba (BABA) were trading at 12-month forward PE ratios of 15.8x and 27.5x, respectively, on April 30.

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Analysts expect Etsy’s 2018 revenues to be $539.9 million, up 22.4% due to its strategic initiatives. However, its adjusted earnings per share (or EPS) are expected to be $0.40 compared to EPS of $0.48 in 2017. Although investments and increasing costs from migrating data to the cloud are concerns for Etsy, tax reform benefits could provide some respite.

Analysts’ ratings

On April 30, five of the ten analysts covering Etsy stock recommended a “buy,” four recommended a “hold,” and one recommended a “sell.” Analysts are bullish, as the company’s strategic initiatives are producing the desired results.

Etsy’s growth prospects appear bright as consumer preference shifts to online shopping. Because Etsy is still a small player, competition with the major traditional retailers should increase as they develop their digital platforms.

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For fiscal 2018, Etsy’s management expects revenues to grow 21.0%–23.0%, while its GMS (sales on its platform) is expected to increase 14.0%–16.0% on a year-over-year basis. Currently, the analysts’ target price for the company is $28.00, which reflects a 6.5% downside to its stock price on April 30.

Peers’ ratings

About 56.0% of the 39 analysts covering eBay (EBAY) stock provided a “buy” rating and 41.0% rated it as a “hold.” eBay’s mean target price is $48.49, which indicates a 28.0% upside to its stock price on April 30.

About 96.0% of the 45 analysts covering Alibaba (BABA) stock provided a “buy” rating, and 4.0% rated it as a “hold.” Alibaba’s mean target price is $219.56, which indicates a 23.0% upside to its stock price on April 30.


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