The e-commerce environment is showing signs of suffering amid the ongoing coronavirus outbreak and the majority of sellers on Etsy Inc (NASDAQ: ETSY) are "losing traction," according to Roth Capital Partners.
The Etsy Analyst
Darren Aftahi downgraded Etsy's stock from Buy to Neutral with a price target lowered from $61 to $41.
The Etsy Thesis
Aftahi said first-hand surveys of around 40 sellers on Etsy's platform with a focus on those with products that have more than 1,000 reviews show a "general consensus" that sales and traffic have been notably impacted by the coronavirus and potential economic fallout. An estimated 60% to 75% of sellers have seen some form of traffic and sales slowdown, while some stores have seen orders "disappear" since the start of March.
Some sellers did note it's business as usual but most of those are expecting uncertainty over the next one to two months. One seller expects orders to remain under pressure over the next six months.
While the survey findings are clearly bearish, Aftahi said there's reason to remain optimistic over the longer term. For the time being at least, investors should expect the stock to trade sideways.
The research firm's revised $41 price target is based on 20 times on 2021 adjusted EBITDA estimate of $248 million (down 10% from prior estimate). A prolonged coronavirus outbreak could warrant further revisions.
ETSY Price Action
Shares of Etsy were trading lower by more than 10% Thursday at $35.
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Latest Ratings for ETSY
|Mar 2020||Roth Capital||Downgrades||Buy||Neutral|
|Feb 2020||SunTrust Robinson Humphrey||Maintains||Buy|
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