Needham has lowered its 12-month price target on Etsy Inc. (NASDAQ:ETSY) to $65 from $76, while retaining a Buy rating in the wake of the companys fourth-quarter financial results and the decision to sell Depop. The stock is trading at $48.14, which InvestingPro data indicates is below the platforms Fair Value estimate.
The research firm described Depop as a growth buffer for Etsy, estimating that, on a pro forma basis in 2025 projections, the unit contributed nearly 300 basis points to gross merchandise sales growth. At the same time, Needham emphasized that Depop had been a headwind to adjusted EBITDA, and that reclassifying Depop as discontinued operations would lift Needhams 2026 adjusted EBITDA estimate by 7%.
InvestingPro data cited by Needham underscores the profitability of Etsys core marketplace, which continues to report strong gross profit margins of 72%. With Depop moving out of core operations, the analyst note shifted attention to the strategic choices management must make for the proceeds of the sale. Needham quantified those proceeds as equivalent to 20% of Etsys enterprise value or 25% of its market capitalization.
The firm also pointed to managements focus on returning the business to sustainable growth. The Etsy marketplace recorded slight growth in the fourth quarter, and company leadership is concentrating on initiatives aimed at increasing purchase frequency and improving customer retention in 2026. Needham relayed managements expectation that the Etsy marketplace will achieve year-over-year growth in every quarter of the year.
On the earnings front, Etsy reported fourth-quarter 2025 results that topped EPS expectations. The company delivered earnings per share of $0.92 versus a forecast of $0.85, and recorded a quarterly revenue high of $882 million, narrowly missing the projected $884.14 million. Market reaction favored the stronger-than-expected profitability despite the slight revenue shortfall.
Other sell-side commentary noted alongside Needhams update included Cantor Fitzgeralds decision to keep a Neutral rating while trimming its price target to $51 from $55. Cantor reported that gross merchandise sales for Etsy were broadly in line with expectations and that EBITDA exceeded prior estimates by 4%. The firm also highlighted that core Etsy Marketplace GMS declines improved by 2 percentage points to negative 1% year-over-year when excluding foreign exchange effects.
These developments center investor attention on how Etsy will allocate the proceeds from the Depop divestiture and on the companys capacity to translate margin strength in its core business into a resumption of durable top-line growth. With Depop now set to be accounted for outside continuing operations, analysts are recalibrating profit metrics and reassessing the companys valuation dynamics relative to its Fair Value estimate.
Summary
Needham trims Etsy price target to $65 from $76 while maintaining Buy. Depops sale changes profit and valuation dynamics - boosting 2026 adjusted EBITDA estimates by 7% under Needhams model - and represents a sizable portion of Etsys value. Management is prioritizing initiatives to drive frequency and retention, aiming for quarter-on-quarter marketplace growth through 2026.
Key points
- Needham lowers Etsy price target to $65 but keeps Buy rating; stock trades at $48.14 and is seen as undervalued versus Fair Value by InvestingPro.
- Depop contributed nearly 300 basis points to pro forma 2025 GMS growth but weighed on adjusted EBITDA; treating Depop as discontinued operations raises Needhams 2026 adjusted EBITDA estimate by 7%.
- Etsys core marketplace shows a 72% gross profit margin (InvestingPro data); management targets frequency and retention initiatives to support year-over-year quarterly growth in 2026.
Risks and uncertainties
- How Etsy uses the proceeds from the Depop sale will materially affect corporate valuation and capital allocation outcomes - a central uncertainty for investors and markets tied to consumer internet and e-commerce sectors.
- Execution risk around managements initiatives to boost frequency and retention could influence the pace of return to sustainable growth in the marketplace, with implications for revenue momentum and profitability.
- Possible variance between revenue and EPS outcomes - illustrated by the slight revenue miss in Q4 despite an EPS beat - highlights sensitivity to volume and mix in the consumer and online marketplaces segment.