Acquisition Puts Etsy in Gen-Z Proximity

The beloved online marketplace selling handmade crafts and goods is going to grow significantly. Etsy Inc. (ETSY) announced a $1.63 billion acquisition of the fashion reseller Depop, vastly expanding its exposure to youth clothing and apparel markets. The deal will close in Q3 of FY21. (See ETSY stock analysis on TipRanks) 

Darren Aftahi of Roth Capital Partners published an analysis on the matter, stating that Etsy will increase its stake in the Gen-Z world of social commerce, as Depop uses many influencers to promote inventory content on social media. Aftahi assigned a Buy rating on the stock, and declared a price target of $245, reflecting a potential upside of 45.65% from Monday’s closing price.  

Aftahi was upbeat about Depop’s acquisition, noting that it is “said to be the second most visited site for Gen-Z’s in the U.S.,” and that 90% of its active users are below the age of 26. Depop has high consumer engagement, with 49% of buyers returning for more purchases. He also wrote that in regard to market growth, second-hand apparel is set to outpace fast fashion by two-to-one.  

Depop, however, does not come without its risks, as the resale apparel market currently has high levels of competition. Furthermore, Etsy itself is slowly losing its unique leadership position in the handmade craft industry, as Amazon Handmade has entered into the niche market, Aftahi mentioned.  

The analyst was critical of Etsy, saying that the company faces a double-edged sword in regard to its business model. Its policies mandating sustainability and handmade goods could limit future growth. On the other hand, shifting away from those policies may push away otherwise loyal buyers and sellers toward the website’s competitors.  

On TipRanks, ETSY is calculated to be a Strong Buy, based on 12 Buy, 1 Hold, and 1 Sell ratings. The average analyst ETSY price target is $222.92, representing a potential 12-month upside of 32.44%.  

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.