By Emily Dattilo

Jefferies is optimistic about the internet sector, but Etsy and Pinterest aren't on its list of winners.

Analysts, led by John Colantuoni, upgraded e-commerce platform Etsy stock to Hold from Underperform and increased their per-share price target to $55 from $45. And they downgraded image-sharing platform Pinterest to Hold from Buy and cut their price target to $32 from $40.

Etsy slipped 0.3% and Pinterest stock fell 3% in Monday trading.

Analysts said Etsy would have an easy time beating estimates this year and a product strategy shift in 2024 that included removing low-quality inventory and instituting a shop setup fee should increase sales starting in the summer.

Also, the analysts wrote in their Monday report, Etsy's earnings before interest, tax, depreciation, and amortization (Ebitda) margin could grow from marketing investment.

"That said, limited progress toward a turnaround so far and poor visibility into the long-term algorithm keep us from growing more positive," they added.

The team thinks Pinterest can boost revenue in line with the company's three-to-five-year Investor Day target of mid-to-high teen growth.

"We believe PINS is yet to prove itself as a performance advertising platform, which we believe is key to driving longterm upside to revenue, " the analysts wrote, adding that near-term trends are more muted because of a slower ramp of its advertising tools.

"We are positive on the Internet sector, driven by a supportive macro backdrop and constructive valuations," Jefferies wrote. "We recommend investors focus on stories that can consistently beat and raise, as we expect Internet outperformance to be driven more by fundamentals than multiple expansion."

Their top picks are Uber Technologies, AppLovin, Take-Two Interactive Software, and Zillow.

Write to Emily Dattilo at emily.dattilo@dowjones.com

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January 13, 2025 10:50 ET (15:50 GMT)

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