Analyst mulls idea of eBay merger with another key e-commerce firm

You never know; it might work.

Companies tend to merge so that they can gain market share, reduce operating costs, expand to new territories, unite common products, and grow revenue and profit.

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Mergers and acquisitions have been trending downward since 2021, when more than 33,000 deals were recorded. President Donald Trump’s latest round of tariffs could hit M&A activity hard, primarily by creating uncertainty, raising costs and snarling supply chains

Nevertheless, analysts at Piper Sandler recently theorized about a potential merger between online auction platform eBay  (EBAY)  and another prominent e-commerce company, Etsy, which has been navigating a challenging period.

Etsy CEO: 2024 was a challenging year 

Etsy  (ETSY) , a platform for selling handmade or vintage items and craft supplies, has been going through some tough times. 

The Brooklyn, N.Y., company’s stock is down 9.2% since January and nearly 27% from a year ago. Etsy is scheduled to report quarterly results next month,

In February, Etsy, reporting for the fourth quarter, posted a 6.8% decline in gross merchandise sales year over year to $3.7 billion. Its active sellers fell 10% to 8.1 million. 

Related: Analyst reworks eBay stock price target on economic uncertainty

Gross merchandise sales refers to the total value of everything sold through a platform or marketplace over a specific period. It is a key metric for understanding the scale of a business’s sales and growth.

Last year was challenging for Etsy, a year in which “we underperformed the far higher standards we hold for ourselves as the market leader for special,” Joshua Silverman, Etsy’s president and chief executive, told analysts in February. 

“We’re disappointed as we know you are, and we’re working with tremendous urgency and focus to inflect the trajectory of the Etsy marketplace GMS performance,” he added.

The company has made several executive changes, including appointing Kruti Patel Goyal president and chief growth officer of Etsy. She had been CEO of Etsy’s Depop fashion-resale subsidiary.

“Recent e-commerce growth has been skewed toward those that offer low prices and fast delivery, and that’s a game we’re unlikely to win,” Silverman said. “We also recognize that consumers are shopping and spending their time differently, with more competition than ever for mind share.”

In discussing the economic environment, Silverman said “certainly, it won’t hurt for consumers to feel more confidence and feel like they are not trying to pinch every single penny.

“So having more consumer confidence would no doubt help,” he added. “That said, we’re very focused on doing what we can do within our power, and I do think we have a lot of agency here.”

Analyst: EBay-Etsy merger an elegant solution

Piper Sandler examined a theoretical Etsy-plus-eBay combination in light of Etsy’s stock having been lagging for three years and gross merchandise sales declines have been sharpening.

EBay has been contending with shrinking market share and increasing competition. The company had 132 million active users in 2024, flat with the previous year, and active users have stagnated over the past two years.

Ultimately, M&A could be an elegant solution for growth woes, Piper Sandler said, since Etsy is a unique platform that needs frequency, data and scale, while eBay has all three and is invested in artificial intelligence.

If Etsy grew, enabled by eBay’s scale, value would likely be untapped, the investment firm said. Given eBay’s 134 million active buyers, Piper Sandler estimates a pro-forma buyer base would be about 174 million, or 60% of the Amazon AMZN buyer base.

While Piper Sandler sees a relatively low likelihood of an outright merger transaction, Etsy might have a tough time returning to growth on a standalone basis, the firm suggests.

Related: Veteran analyst takes hard look at SoFi price target after stock slump

Piper estimates the combined pro-forma eBay would be valued at $85 per share.

Overall, the firm said, a deal would make good sense for eBay.

In addition, Wells Fargo pared the firm’s price target on Etsy to $46 from $47 and affirmed an underweight rating on the online crafts market’s stock.

The firm said it expected in-line Q1 results. But it is trimming estimates and sees increasing risk to Q2 and second-half consensus estimates due to macroeconomic uncertainty.

The firm said that attempting to shift buyer behavior on Etsy during a period of consumer pressure is a complicated endeavor.

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