By Emily Dattilo
eBay and Etsy have similar stories, but only one of the e-commerce stocks is a buy, Morgan Stanley argued on Thursday.
Analysts Nathan Feather and Brian Nowak upgraded eBay to Overweight from Underweight and boosted their price target to $62 from $35 in a note titled "Shopping for Opportunities." The duo also cut their rating on Etsy to Underweight from Equal Weight and lowered the price target to $55 from $64.
There's "a pair trade opportunity" with eBay and Etsy, Morgan Stanley analysts wrote. Investors in the space are looking for gross merchandise value, or GMV, to tick higher this year as the macro environment improves and margins bottom out.
"We expect the growth profiles to converge and model both grow earnings before interest, tax, depreciation, and amortization at a 5% '23-'26 compound annual growth rate," they wrote, noting that eBay trades at a 35% discount to Etsy on 2025 EBITDA.
"We expect the valuation gap to narrow and EBAY to outperform ETSY," analysts added.
Morgan Stanley sees an opportunity for eBay with artificial intelligence-assisted listings, explaining how incorporating those can edge sales higher while also allowing margins to expand.
The team is less optimistic about Etsy. After strong performance during the Covid-19 pandemic -- as consumers snapped up arts and craft supplies to fill the time -- analysts believe the stock "has reached a new level of saturation."
eBay stock was rising 3.3% to $51.09 in premarket trading Thursday, while Etsy was off 4.6% to $64.40. Futures tracking the S&P 500 were rising 0.3%.
Write to Emily Dattilo at emily.dattilo@dowjones.com
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(END) Dow Jones Newswires
April 18, 2024 08:21 ET (12:21 GMT)
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