Online marketplace Etsy (ETSY) has announced that it intends to offer $650 million aggregate principal amount of convertible senior notes due 2027 in a private placement to qualified institutional buyers.
The notes will be general unsecured obligations of Etsy and will accrue interest payable semiannually in arrears. They will be convertible into cash, shares, or both, at Etsy’s decision.
The interest rate, initial conversion rate and other terms of the notes will be determined at the time of pricing of the offering.
Etsy expects to use the net proceeds to repurchase part of its outstanding convertible senior notes due 2023, as well as for general corporate purposes- including stock buybacks, working capital, operating expenses and capital expenditures.
In November 2018, Etsy’s board of directors approved a stock repurchase program for up to $200 million of Etsy’s common stock- and as of June 30, 2020, $77.5 million remains available for repurchase.
Shares in Etsy have exploded by 200% year-to-date, and analysts have a bullish Strong Buy consensus on the stock’s outlook. Out of 16 analysts, 15 rate the stock a buy, with only one saying sell. That’s with an average analyst price target of $150 (13% upside potential).
RBC Capital analyst Shweta Khajuria reiterated her buy rating on ETSY while ramping up her price target from $117 to $164, after the company reported a strong beat and raise quarter. Elevated consumer demand drove all-time high gross merchandise sales and revenue growth, alongside EBITDA of $151 million (35.1% margin, another record).
“We believe Etsy is set-up for healthy, sustainable long-term growth and margin expansion, driven by the growing base of repeating buyers, Offsite Ads, international markets, and product development” the analyst told investors post-print, adding that fundamentals are looking ‘super strong.’ (See ETSY stock analysis on TipRanks)
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