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Etsy (ETSY) to Acquire Elo7 to Expand Marketplace Offerings

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In a bid to strengthen e-commerce capabilities, Etsy ETSY has entered a definitive agreement to acquire Brazil-based Elo7 for $217 million in cash.

Notably, Elo7 operates an online marketplace for handmade items under 40 retail categories. The most popular categories on the marketplace are special events and life moments like weddings, children's parties, baby and home decor.

Further, there are 1.9 million active buyers and around 56,000 active sellers on the marketplace at present.

The Elo7 buyout is expected to be completed in third-quarter 2021. The acquisition is expected to be accretive.

On the completion of the deal, Etsy’s marketplace offerings will expand, which, in turn, will likely aid it in gaining customer momentum further.

Etsy, Inc. Price and Consensus

Etsy, Inc. Price and Consensus
Etsy, Inc. Price and Consensus

Etsy, Inc. price-consensus-chart | Etsy, Inc. Quote

Buyout Holds Promise

The latest move is likely to aid Etsy in gaining a strong footprint in the e-commerce market, which,per a report from Grand View Research, is expected to witness a CAGR of 14.7% between 2020 and 2027.

Further, an eMarketer report indicates that the worldwide e-commerce market is expected to generate sales worth $4.9 trillion in 2021, $5.4 trillion in 2022, $5.9 trillion in 2023 and $6.4 trillion in 2024.

Moreover, Etsy is likely to get good exposure to Brazil’s booming e-commerce market on the back of Elo7.

As per the data from ecommerceDB, the e-commerce market of Brazil is expected to witness a CAGR of 9% between 2020 and2024.

We believe that Etsy is well-poised to capitalize on the immense growth prospects present in Brazil’s online retail space on the back of a strong seller and buyer base on Elo7’s marketplace.

Growing Efforts

The latest move bodes well for Etsy’s strengthening endeavors toward bolstering its marketplace business.

Apart from the Elo7 acquisition agreement, the company has recently entered an agreement to acquire Depop, a provider of a resale fashion marketplace, for $1.6 billion. The deal is also expected to be completed in third-quarter 2021.

Further, with Depop, the company remains well-poised to capitalize on the growth prospects present in the second-hand market, which is likely to seea CAGR of 39% between 2019 and 2024.

Upon the closing of the recent deals, Etsy’s marketplace business will comprise Etsy, Reverb, Depop and Elo7.

We note that Etsy’s marketplace business remains the key growth driver. The company is continuously benefiting from accelerating Marketplace revenues. Solid momentum across active sellers and buyers remains a major positive. Additionally, the company’s expanding collection of unique items is another positive.

All the factors will likely continue to shape up the company’s growth trajectory in the near term as well as in the long haul.

Zacks Rank & Key Picks

Etsy currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Synopsys, Inc. SNPS, Marchex, Inc. MCHX and Benefitfocus, Inc. BNFT, each presently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rates for Synopsys, Marchex and Benefitfocus are currently pegged at 14.65%, 30% and 15%, respectively.

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