Shares of Etsy (ETSY) dropped in morning trading after an analyst cut his rating to Neutral, saying a takeover of the company is not imminent despite the company's review of strategic alternatives. The downgrades comes after Amazon (AMZN) introduced its Wedding Shop from Handmade and a report said Etsy is downscaling its intern program.

ANALYST REACTION: Citi analyst Mark Kelley downgraded Etsy this morning to Neutral from Buy, telling clients in a note that while the stock has run on its review of alternatives, a takeover is "not imminent" and the company will likely work through operational changes as the new management team gets acclimated rather than seek a buy. The stock could be worth $21-$22 if Etsy is acquired, but $7 if the company remains a standalone with little to no improvement in operational performance, Kelley said. He added he sees risk due to the lack of near-term visibility as he awaits guidance from the company's new management team. He tells investors to hold the stock if already involved and raised his price target for the shares to $14 from $13.

STRATEGIC REVIEW: Earlier this month, TPG Group and Dragoneer Investment Group jointly reported an 8% stake in the company and asked Etsy to engage in discussions regarding strategic alternatives. Etsy said in a statement that it values constructive engagement with its shareholders and is focused on maximizing value for all shareholders. Josh Silverman, Etsy's new CEO, confirmed that the company is reviewing strategic and operational plans "to ensure Etsy is focused on the most value-enhancing near- and long-term opportunities." Following the announcement, Loop Capital analyst Blake Harper downgraded the stock to a Hold from Buy, saying a review makes an "imminent sale" unlikely, while Maxin analyst Tom Forte said the review could allow new management to leverage the company's high-potential business model or may result in the board opting to sell the company.

AMAZON TARGETS ETSY: Shares of the craft good marketplace have fallen steadily since its IPO in mid April of 2015. The stock hit its high back in April of 2015, briefly trading as high as $36 per share, but quickly came back to earth to trade as low as $6.04 per share at the beginning of 2016, down over 80%. Shares have been the victim of competition from Amazon (AMZN), and eBay (EBAY). As Etsy reviews its strategic and operational plans, Amazon this week introduced the Wedding Shop from Handmade on Tuesday which features "a selection of thousands of unique, handcrafted products" for weddings, aiming for customers who may "have otherwise turned to Etsy for, if shopping online," according to a TechCrunch report. Some Etsy sellers have declined to participate on the wedding shop, but others may consider moving in an effort to scale their business, according to the report.

INTERN PROGRAM CUTS: In addition, Bloomberg said this week that Etsy is downscaling its intern program two weeks before college students were slated to start in the positions. The company told students their roles were no longer available and retained just a handful of computer engineering interns. The move followed criticism by shareholder Black-and-White Capital to cut wasteful spending, increase sales growth and raise shares.

PRICE ACTION: Shares of Etsy fell 1% to $13.27 in late morning trading.