Online marketplaces are witnessing a significant uptick in visitors, a trend that has been accelerated by the COVID-19 pandemic. As brick-and-mortar shops remained closed, people turned to online marketplaces, where products and services are offered by third-party vendors, to fulfill their needs.
According to a Statista report, while Amazon (AMZN) and eBay (EBAY) remain the most visited online marketplaces globally, other competitors are quickly catching up.
Let us compare two such online marketplaces, Etsy and eBay, using the TipRanks stock comparison tool and see what Wall Street analysts are saying about these stocks.
Etsy (NASDAQ: ETSY)
Shares of Etsy have seen a significant pullback as the stock has plunged 17.4% in the past month. This is even as the company is experiencing significant interest from buyers on its platform.
In Q3, the online marketplace acquired 11.1 million new and reactivated buyers. Reactivated buyers are those buyers who have not purchased from Etsy in the past year. The company stated in its press release that the number of additions of new buyers in the quarter “continues to be meaningfully elevated when compared to pre-pandemic levels.”
When it comes to revenues, Etsy posted revenues of $532.4 million in Q3, an increase of 17.9% year-over-year. However, diluted earnings came in at $0.62 per share versus $0.70 per share in the same period last year.
Guggenheim analyst Oliver Hu is also of the view that Etsy is “one of the best positioned companies this holiday” not only based on the above metric, but also based on other key strengths. Let us look at some of the key positives for the stock.
The analyst cited app usage data from Apptopia, showing that Etsy app sessions are up 54% quarter-to-date versus 50% in Q3. Hu believes that this “has positive multi-quarter implications.”
Joshua Silverman, CEO of Etsy, had commented on its Q3 earnings call that the company’s app is “the most used mobile channel for purchases on Etsy,” resulting in higher user engagement and user frequency.
Another positive for Etsy is that the company’s web traffic data is also looking up. Indeed, the TipRanks Website Traffic data supports this view. This data indicates that total unique visitors on all devices to the company’s website year-to-date are up 19.39% in comparison to the same period last year.
Even analyst Hu added that there are strong indications that the website experience is improving, as after actively tracking “several website KPIs [key performance indicators],” he sees “declines in bounce rates [% of traffic that leaves after one page], tying in with a number of initiatives to improve content and the overall consumer experience.”
The analyst also pointed out that Etsy’s product supply is steadily increasing. By his estimate, there are currently 98.5 million items for sale, up 15% year-over-year.
Hu added, “Etsy remains a significant outlier within the consumer space, as it’s been able to retain its pandemic gains and deliver growth on top of record levels, resulting in sustained triple-digit underlying growth.”
Moreover, the analyst believes that the recent fall in Etsy’s stock price could result in a buying opportunity for the stock. His “positive view centers more on the sustainability of momentum, with ample room for buyer growth and wallet share gains ahead.”
Hu is upbeat about the stock, with a Buy rating and a price target of $330 (46.5% upside) on the stock.
Other Wall Street analysts are cautiously optimistic about Etsy with a Moderate Buy consensus rating based on 11 Buys, 2 Holds, and 1 Sell. The average Etsy price target of $274.54 implies 21.8% upside potential to current levels.
eBay (NASDAQ: EBAY)
eBay is currently going through a transition period, as it has sold several business segments over the past two years, including StubHub, Classifieds, and EBAY Korea. The company has made it clear that it intends to concentrate more on its Marketplace platform.
Guggenheim analyst Oliver Hu is “positive” about the strategic direction that the company has taken, and also about its management team, as they have simplified the business portfolio “and increased their focus on enhancing the experience across category verticals, driving higher value buyers, and creating new profit streams.”
But the analyst also pointed out that there is near-term pressure on the company’s growth, as indicated by its recent Q3 results. In Q3, eBay’s Gross Merchandize Volume (GMV) slid 10% year-over-year to $19.5 billion, while annual active buyers also fell 5% year-over-year to a total of 154 million.
However, Hu added that some of this decline was intentional, as eBay concentrated on higher value buyers, and “it may take a few more quarters to get comfortable with that vs. attrition from peak pandemic demand.”
While the analyst remained encouraged with the traction across a number of categories on eBay, including watches, sneakers, and collectibles, a key concern remained. This was, according to Hu, that eBay still lagged other online marketplaces when it comes to website traffic.
The analyst analyzed average monthly traffic for 12 marketplaces that indicated that page views have climbed on an average of 90% since 2018 for these 12 marketplaces. When including Etsy, there is a rise of 100%.
In contrast, Hu mentioned that these page views have declined for eBay over that same time period. These metrics indicate that competitive dynamics are “elevated” for the company, the analyst concluded.
This is also borne out by analyzing the website traffic data using the TipRanks website traffic tool. This data, provided by SEMRush Holdings (SEMR), indicates that total estimated visits to the eBay site on all devices year-to-date are up only 0.24% from the same period last year.
Lastly, Hu added, “The stock may trade sideways for now, against difficult comparisons and as other parts of retail recover. We would expect to get a clearer view of eBay’s true run -rate over the next 6 -9 months, with the upcoming analyst day an important potential catalyst to lay a framework for long-term growth.”
As a result, the analyst was sidelined on the stock with a Hold rating and a price target of $80 with a 19.6% upside.
Rest of the Street is cautiously optimistic, with a Moderate Buy consensus rating based on 7 Buys and 11 Holds. The average eBay price target of $78.59 implies 17.5% upside potential to current levels.
Bottom Line
It is important here to note that there is a difference between the kind of online marketplace that these companies aim to be. While eBay is concentrating more on its Managed Payments and advertising business when it comes to its marketplace, Etsy is looking at attracting potential buyers looking for niche everyday items or those for “special purchase” occasions.
While analysts are cautiously optimistic about both stocks, based on the upside potential over the next 12 months, Etsy seems to be a better buy.
Disclosure: At the time of publication, Shrilekha Pethe did not have a position in any of the securities mentioned in this article.
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