1️⃣ Market maneuvers
Morgan Stanley has made significant changes in their ratings, giving eBay (NASDAQ:EBAY) a double upgrade to 'Overweight' from 'Underweight' and Etsy (NASDAQ:ETSY) a downgrade to 'Underweight' from 'Equal Weight'. The decision comes amid eBay's noticeable growth in GMV, adjusted EBIT margin, and adjusted EPS, suggesting a pivotal moment for the company. Meanwhile, Etsy's downgrade was influenced by a stagnation in transaction frequency, casting a shadow over its medium-term growth prospects.
2️⃣ Strategic shifts at eBay
Under the new leadership, eBay is shifting from category-specific enhancements to broader, site-wide solutions. This includes a significant push into general AI to improve marketplace functions, from AI-assisted listings to buyer-seller interactions, aiming for a balanced growth in GMV while possibly expanding their margins.
3️⃣ Etsy's growth challenges
Etsy, on the other hand, faces challenges in enhancing transaction frequency among its users. The analysts at Morgan Stanley suggest that Etsy's future might require increased marketing investments to attract and retain customers, potentially limiting margin expansion. This strategic critique aligns with their lower expectations of a mere 3% GMS CAGR from 2023 to 2026.
4️⃣ Investment implications
"Buy eBay and short Etsy," advises Morgan Stanley, citing the $1.1 trillion e-commerce market's potential and their forecasts. eBay's stock saw an increase of 3.6% before the market opened on Thursday, indicating investor confidence boosted by the upgrade. Etsy's outlook, however, remains cautious among investors.
How will eBay's AI innovations impact its market share?
