In their latest note on the US e-commerce sector, Morgan Stanley analysts said they double upgraded eBay (NASDAQ:EBAY) to Overweight from Underweight and demoted Etsy (NASDAQ:ETSY) to Underweight from Equal Weight, citing “growth convergence.”
“We prefer to play marketplaces tactically once scaled and try to identify points of inflection, which we see happening at EBAY with GMV, adj. EBIT margin, and adj. EPS all accelerating,” analysts wrote.
Morgan Stanley notes that eBay is currently shifting its strategy from a focus on category-specific enhancements toward broader, site-wide solutions that incorporate more proactive innovation.
They believe eBay is also developing a pipeline of general AI features, signalling a strategic evolution in its approach to enhancing the platform's capabilities.
“We are turning more positive as we believe the shift to more horizontal solutions such as AI-assisted listings can enable a balance of slight GMV acceleration while maintaining or expanding margins,” they said.
EBAY shares rose 3.6% ahead of Thursday's market open.
For ETSY, the downward revision comes amid limited growth in transaction frequency that contributes to a more bearish outlook on the company's medium-term growth prospects, said analysts.
They now project a modest Gross Merchandise Sales (GMS) compound annual growth rate (CAGR) of approximately 3% from 2023 to 2026. Moreover, margin expansion could be hindered “as increased marketing spend is needed to attract and retain incremental buyers,” analysts noted.