Wedbush Slashes Etsy Target To $9, Says Amazon Will 'Out-Etsy' It

In a report published Friday, Wedbush analyst Gil Luria reiterated an Underperform rating Etsy Inc (NASDAQ: ETSY), while lowering the price target from $13 to $9. The analyst believes that sellers are likely to shift their listings to Amazon.com, Inc. (NASDAQ: AMZN) due to the growing presence of mass produced and counterfeit items on Etsy.

"We expect Etsy to enjoy near-term growth within its niche as it increases marketing spend. However, we believe the dilution of the brand by potentially counterfeit and mass manufactured items may curtail listing and revenue growth, especially as sellers shift their items to Handmade at Amazon," Luria stated.

Amazon has invited sellers on Etsy and other platforms to its new Handmade platform. Frustrated seller had limited options earlier to create their storefront. However, with the launch of Handmade, Amazon offers a value proposition that is materially superior and offers competitive take rates, along with access to Amazon Prime and a commitment to only listing handmade products.

According to the Wedbush report, "Not only does Amazon offer handmade sellers access to 250 million buyers (compared to 20 million for Etsy), its 12 percent take rate includes payment, marketing and shipping, which means it would be lower for many Etsy sellers."

Amazon also intends to provide sellers the ability to list non-customized products on Amazon Prime for free shipping, while offering flexibility of 30 days for customized products.

The EBITDA estimates for 2016 have been reduced by 15 percent to reflect in intensifying competition for Etsy from a "formidable" competitor.