Etsy's latest quarterly results have caught the attention of Wall Street, with Morgan Stanley calling the second quarter the online marketplace's strongest for core gross merchandise sales (GMS) growth since 2021. The bank responded by raising its price target on the stock to $73, up from its previous level, signaling confidence in the company's trajectory.
GMS is a key metric for marketplace platforms like Etsy—it represents the total dollar value of goods sold on the site before fees, shipping, and other costs. For investors, GMS growth is a direct indicator of consumer demand and the health of the platform's core business.
What the numbers show
In its guidance, Etsy said it expects third-quarter GMS growth of 4% to 6% year over year. That's a notable improvement after a period of sluggishness that followed the pandemic-era boom, when online shopping surged and then normalized. The company also announced a new $2 billion share buyback authorization, a move that typically signals management believes the stock is undervalued and aims to return cash to shareholders.
Morgan Stanley's price target of $73 suggests the bank sees meaningful upside from current levels, though it's important to remember that price targets are analysts' opinions, not guarantees. The bank's commentary highlights that Etsy's core GMS growth—which excludes certain categories or adjustments—hasn't been this strong since 2021, a period when the company was still riding the wave of pandemic-era e-commerce demand.
Why this matters for investors
For everyday investors, the key takeaway is that Etsy appears to be stabilizing after a rough patch. The company, known for handmade and vintage goods, faced headwinds as consumers pulled back on discretionary spending amid high inflation and shifting shopping habits. A return to stronger GMS growth could signal that the worst is over, but it's not a guarantee of a smooth ride ahead.
The $2 billion buyback is also worth noting. Buybacks reduce the number of shares outstanding, which can boost earnings per share and often provide a floor under the stock price. However, they also use cash that could otherwise be invested in growth initiatives, so investors should weigh the company's priorities.
Morgan Stanley's move is part of a broader pattern of analysts reassessing consumer-facing companies after earnings. For instance, the bank recently lifted its target on Grindr after a strong quarter, and it has also highlighted improving margins for Monster Beverage. These calls reflect a search for companies with durable growth in a mixed consumer environment.
Context: Etsy's journey since the pandemic
Etsy was a pandemic darling, as lockdowns drove shoppers to its platform for masks, crafts, and home goods. But as the world reopened, growth slowed sharply, and the stock has been volatile. The company has worked to expand its buyer base, improve its seller tools, and invest in marketing to reignite momentum.
The 4%-6% Q3 guidance is a positive sign, but it's still modest compared to the double-digit growth rates the company posted in 2020 and 2021. Investors will be watching whether this acceleration can be sustained, especially with consumer spending under pressure from high interest rates and lingering inflation.
What to watch next
Beyond the headline numbers, investors should keep an eye on Etsy's take rate—the percentage of GMS the company keeps as revenue—and its ability to convert GMS growth into profit. The buyback will also be a factor, as it could support the stock price over time.
Morgan Stanley's price target of $73 is a vote of confidence, but it's just one analyst's view. The broader market will be watching Etsy's actual Q3 results, due later this year, to see if the company can deliver on its guidance. If it does, the stock could continue to recover; if it falls short, the optimism could fade quickly.
For now, the message from Etsy and Morgan Stanley is that the platform is finding its footing again. Whether that translates into long-term gains for shareholders depends on the company's ability to keep growing in a competitive e-commerce landscape.
