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Etsy Inc. (NASDAQ: ETSY) shares saw a handy gain early Friday after it received a sizable upgrade from a boutique investment firm. Overall, this firm sees a critical mass of new initiatives, highlighted by Etsy Ads and free shipping, that can drive stronger gross merchandise sales (GMS) growth and margin expansion over time.

Wedbush Securities upgraded Etsy to Outperform from Neutral and raised its price target to $66 from $64, which implies upside of 20% from the most recent closing price of $54.88.

The firm said that it particularly likes the timing, with both Etsy Ads and free shipping launching into the holiday season, supported by Etsy’s brand marketing push, where it is seeing early signs of strong return on investment on TV and social.

As a result, Wedbush sees the 25% pullback in shares since July highs as a strong buying opportunity. Layering on that Etsy’s on track to complete its transition to Google Cloud in the first quarter of 2020, opening up greater compute power that should help Etsy better capitalize on search and discovery improvements, and management’s strong track record of improvements to date, it expects a lot more to come.

Additionally, the firm pointed out that Reverb will begin contributing to results partially in the third quarter and fully in the fourth quarter, future shipping initiatives already are being worked on (for example stronger return policies) and international marketing is starting to roll out with testing underway in the United Kingdom.

Wedbush sees two key positive long-term benefits from the rollout of Etsy Ads: GMS acceleration through increased ad impressions, and better margin expansion as Etsy optimizes its ad spend. Ultimately, this move should increase the overall Etsy marketing seen by consumers while allowing Etsy to leverage its own spend. The firm estimates that Etsy would spend about $143 million on Google advertising in 2021 before any impact from the transition to Etsy Ads and will have access to roughly $200 million of seller budget available to replace its own spend.

The firm detailed its ideas on free shipping in its report:

We see free shipping leading to improved conversion and higher average order value (AOV) over time. In the note we break out estimates for U.S. and international frequency and AOV, and build scenario analysis on GMS impact based on various levels of lift from shipping.

Shares of Etsy traded up about 3% on Friday, at $56.50 in a 52-week range of $38.02 to $73.35. The consensus price target is $76.14.

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