Etsy's landmark partnership with OpenAI is a major catalyst for shares moving forward, according to BTIG. Analyst Marvin Fong wrote in a note to clients that Etsy's partnership with OpenAI's ChatGPT puts the e-commerce site "at the leading edge of agentic commerce." OpenAI on Monday announced a new feature called Instant Checkout that will allow users to make single-item purchases directly from U.S. Etsy sellers through its AI chatbot ChatGPT. The tech giant said more than one million Shopify merchants, including Skims and Glossier, are coming soon. On the back of the partnership announcement, Fong lifted his price target on Etsy by $9 to $81 to suggest shares have about 9% upside from the most recent close of $74.34 per share. The stock closed up nearly 16% on Monday, but shares were recently down about 10% in Tuesday's session, hovering under $67 apiece. "Investors are clearly paying for more than just the immediate impact of this transaction," Fong wrote in the note. "Furthermore, we see ChatGPT's scale, the [total addressable market] unlock, future agentic innovation and the fact we viewed ETSY as undervalued to begin with as justifying today's price action. We believe this deal could be enough to push ETSY to [gross merchandise value] growth next year from current expectations of a small decline and should result in further rerating of the stock." Etsy's partnership with OpenAI notably pays a fee to ChatGPT that is similar to what Etsy pays other channel partners such as affiliates or influencers, and the deal is not expected to affect overall margins, Fong noted. ETSY 1Y mountain Etsy stock performance over the past year. Fong expects ChatGPT queries could lead to between 75 million and 100 million U.S. online orders. His estimate draws on a recent paper from the National Bureau of Economic Research written with the help of OpenAI's Economic Research team that indicated 2.1% of all ChatGPT searches were looking for information on purchasable products, which Fong said he took "as a proxy for shopping intent." The analyst added that it is almost a certainty that ChatGPT's usage will increase from current levels, providing even more runway for the benefits Etsy can see from this deal. Etsy can still work with other AI partners, per the announcement. "We view Etsy as having a dominant position within the handmade/special vertical with low risk of displacement by competitors given their prior unsuccessful efforts. … We believe the shares are undervalued at current levels," Fong said. Etsy shares are up about 26% year to date.
