While Etsy Inc’s (NYSE:ETSY) shares have pulled back significantly since mid-July, there have been certain "positive developments in recent months, according to Guggenheim Securities.

The Etsy Analyst: Analyst Marvin Fong upgraded the rating from Neutral to Buy, while establishing a price target of $90.

The Etsy Thesis: The recent pullback in the company’s shares from trading at a premium of around 20% to the group to trading in-line on a growth-adjusted basis has created "a significantly better risk-reward for investors," Fong said in the upgrade note.

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The analyst noted three positive developments:

  • Firstly, on Aug. 5, Etsy announced a reduction of 12% of its full-time workforce, which is estimated to lower annualized expenses by $35-$45 million, representing 120-160 basis points (bps) of margin opportunity. Management merely raised the low-end of its adjusted EBITDA margin guidance for fiscal 2026, signaling that most of the savings from the headcount reduction would be reallocated for growth.

Despite this, the cost reductions are "unambiguously positive for shareholders as it will either drive growth or flow through to Adjusted EBITDA should investments be dialed back," Fong noted.

  • Secondly, Etsy is achieving better-than-expected buyer growth. The company reactivated 7.1 million lapsed buyers in the second quarter, significantly above BTIG’s estimate of 6.95 million, the analyst noted. Retention improved, with churn of 13.6% coming in lower than expected. These suggest active buyers of 87.0 million for the second quarter, versus expectations of 86.5 million, he added.

"We see active buyers as a critical KPI, and we think its outperformance is the best evidence that ETSY’s strategy is working," Fong further wrote.

  • Thirdly, channel checks suggest GMV (gross merchandise value) is tracking ahead of guidance and Street expectations, the analyst stated. Bloomberg Second Measure data shows that the company’s sales grew 23% in August and 17% in the first week of September, better than the 15% average for the second quarter.

ETSY Stock Price Activity: Etsy shares are trading higher by 0.01% at $72.34 at the time of publication on Friday, according to Benzinga Pro data.

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