Oppenheimer: AI search wins over consumers, upgrades Etsy (ETSY.US) rating to "Outperform"

Product improvements, search result optimization, and strong competitive barriers have led Etsy (ETSY.US) to receive an upgrade from Oppenheimerfrom "Neutral" to "Outperform," with a price target of $90. A survey of 2,500 U.S. consumers shows that product improvements are taking effect, with reduced reliance on Alphabet Inc. Class C search (GOOGL.US) and increased reliance on AI. As a result, Oppenheimer's Jason Helfstein raised his FY2026 gross merchandise sales (GMS) growth forecast to 1%, the highest on Wall Street, and expects GMS to grow 5% in FY2027 and FY2028, respectively. This forecast already accounts for market share loss in the online handmade goods market due to new entrants. Oppenheimer expects the global online handmade goods market to grow 9% annually from 2025 to 2028; even as the market expands, Etsy will lose 117 to 135 basis points of share in 2027 and 2028. However, this analysis is limited to handmade goodsa category that accounts for 73% of Oppenheimer's surveywhile Etsy's product category coverage is much broader. Helfstein noted that Etsy's platform and AI search capability improvements have not gone unnoticed by consumerssurvey results show that 65% of surveyed consumers are "very" or "somewhat" likely to purchase items. The survey also shows that 73% of buyers purchase handmade or customized goods, and 88% of buyers visit Etsy's website/app directly rather than using Alphabet Inc. Class C search. Etsy shares closed down 0.62% on Tuesday at $74, up about 34% year-to-date, compared with an 11% gain in the benchmark S&P index over the same period.