E-commerce company Etsy (ETSY) has signed an all-cash deal to acquire Elo7 for $217 million. The purchase price is subject to certain adjustments to Elo7’s working capital, transaction expenses, cash, and indebtedness.
Founded in 2008, Elo7 provides a custom, made-to-order marketplace and ranks as a top 10 e-commerce site in Brazil. It connects about 1.9 million active buyers with 56,000 active sellers and currently has about 8 million items for sale, the majority of which are made-to-order.
Elo7 is expected to retain its headquarters in Sāo Paulo, Brazil, and will be run by its existing leadership team. Subject to customary closing conditions, the transaction is expected to close during the third quarter of 2021.
Etsy expects Elo7’s current run rate for gross merchandise sales (GMS) and revenue to be neutral to Etsy’s top line and modestly dilutive to adjusted EBITDA margin. (See Etsy stock chart on TipRanks)
CEO Josh Silverman said, “This transaction will establish a foothold for us in Latin America, an underpenetrated e-commerce region where Etsy currently does not have a meaningful customer base.”
On June 16, Truist Financial analyst Naved Khan reiterated a Buy rating on the stock and raised the price target to $217 from $215. The new price implies 13% upside potential from current levels.
Khan noted Etsy has the potential to grow in the medium-to-long term on the back of demographic appeal and a go-to-market strategy.
The rest of the Street is optimistic about the stock, with a Strong Buy consensus rating based on 12 Buys, 1 Hold, and 1 Sell. The average Etsy price target of $221.92 implies 15% upside potential from current levels.
TipRanks data shows that financial blogger opinions are 100% Bullish on ETSY compared to the sector average of 69%.
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