Etsy, Inc. (ETSY) shares fell more than 10% after Roth Capital downgraded the stock from Buy to Neutral and reduced its price target to $41.00 per share. The new price target still reflects a nearly 20% premium to the current market price despite being well below the average Street estimate.
Analyst Darren Aftahi's channel checks suggest that traffic and sales are slowing down for sellers on the platform amid the COVID-19 outbreak. While uncertainty will persist for the time being as consumers cut spending, the analyst is optimistic about Etsy's business over the long term.
The online nature of the business could help it compete against brick-and-mortar retailers that are expected to see slower foot traffic over the coming months. In addition, the company had already reported higher-than-expected financial results for the fourth quarter amid booming business.
In addition to its fundamental performance, Etsy stock traded higher in early February after The Wall Street Journal reported that the Intercontinental Exchange was interested in acquiring eBay Inc. (EBAY), expanding into product-based marketplaces.
From a technical standpoint, the stock continued its breakdown from trendline support at $40.00 to fresh lows. The relative strength index (RSI) fell to oversold levels of 28.75, but the moving average convergence divergence (MACD) remains in a strong bearish downtrend. These indicators suggest that the stock could see some consolidation before continuing lower.
Traders should watch for consolidation around trendline resistance near $40.00 over the coming sessions. If the stock breaks out higher, traders could see a move toward reaction highs and the 50-day moving average of around $50.00. If the stock fails to move higher, traders could see the downtrend resume and a move to fresh lows.
The author holds no position in the stock(s) mentioned except through passively managed index funds.