E-commerce specialist Etsy (NASDAQ:ETSY) — which focuses on handmade or vintage items and craft supplies — saw its shares pop higher on activist investing news. Specifically, Elliott Management partner Marc Steinberg will join the company’s board of directors. In addition, the activist firm disclosed a “sizable” investment in ETSY stock, which could also benefit from bullish speculation.
According to CNBC, Elliott built a roughly 13% position in ETSY stock, per a person familiar with the matter. This economic interest represents a blend of shares and options. The position would also make it Etsy’s largest investor. Notably, Elliott and Etsy have been meeting for a few months.
Other top shareholders of ETSY stock include Vanguard, which owns an 11% stake and BlackRock (NYSE:BLK), which owns 5%.
Moreover, Etsy CEO Josh Silverman stated that the company was “excited” to welcome Steinberg to the board. Beyond the investment boost, that may be due to Elliott’s successful track record of turning enterprises around. For instance, Elliott urged for changes at Phillips 66 (NYSE:PSX) to unlock value. Sure enough, PSX marched higher following the news.
As for joining the Etsy board, Steinberg had this to say in a release:
“I am looking forward to working with the Board and supporting Josh and the team as they execute on initiatives to improve the customer experience, accelerate top- and bottom-line growth, and drive long-term value.”
ETSY Stock Could Enjoy Contrarian Speculation
As CNBC reported, Etsy represented one of the biggest beneficiaries of the Covid-19 pandemic. Essentially, quarantined shoppers engaged in collective retail therapy, driving up ETSY stock. At its peak, it reached a few bucks shy of $300 per weekly average price data provided by Google Finance. Unfortunately, the underlying e-commerce specialist could not keep the fire burning.
In particular, inflation-burdened customers began pulling back on their spending. According to the personal saving rate provided by the U.S. Bureau of Economic Analysis, consumers generally began opening their wallets from April 2020 to June 2022, when the metric fell to 2.7% from 32%. However, the saving rate would then go on to hit 5.3% on May 2023, reflecting the inflation-and-interest-rate double headwind.
However, in December, the personal saving rate dipped to 3.7%, possibly reflecting consumers’ willingness to spend. Further, contrarians may have one more reason to consider ETSY stock.
Currently, ETSY’s short interest stands at 12.31% of its float. Also, its short interest ratio comes in at 5.67 days to cover. At first glance, these stats — though elevated — might not seem especially remarkable given other popular short-squeeze candidates. However, just back on Jan. 18, the short interest and short interest ratio landed at 11.23% and 3.97%, respectively. Therefore, the bearish interest is rising.
Finally, the short (sold) call position of 538 contracts of the Feb 16 ’24 65.00 Call risks getting blown up. At the time of the transaction – for which bearish traders received $262,640 in premium — the price of ETSY stock was $67.79.
Right now, it’s at $71.95.
Why It Matters
According to TipRanks, analysts rate ETSY stock a consensus moderate buy. This assessment breaks down as 11 buys, 10 holds and two sells. Overall, the average price target lands at $80.77, implying about 12% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
