Will Etsy’s Stock Extend Its Rise In 2021?

Etsy’s stock (NASDAQ: ETSY), an American e-commerce website focused on handmade or vintage items and craft supplies, has gained 3.6x – moving from about $44 to $159 since the end of 2019 and as per consensus analyst estimates the stock price could potentially go up by 40% over the current price of $159. The company hugely benefited from the shift toward online commerce due to the Covid-19 pandemic last year. The company saw significant improvement in the value of buyer cohorts, as they acquired 61 million new and reactivated buyers, and saw nearly 160% growth in their habitual buyers. This led to the company more than doubling their FY 2020 revenue to $1.73 billion compared to 0.82 billion in 2019. Their Gross Merchandise Sales also increased by 107% to $10.28 billion in 2020 from $4.97 billion in 2019. Along with high revenue and Merchandise sales Etsy also improved its Net Income margin to 20% in 2020 from 11% in 2019. Our dashboard, ’Buy or Sell Etsy Stock?’ provides the key numbers behind our thinking, and we explain more below.

Etsy revenues saw a massive growth of 291% from $0.4 billion in 2017 to $1.7 billion in 2020. In the same period, the Net Income margin has risen by 9.2%. This, in turn, saw EPS grow by 317% from $0.69 in 2017 to $2.88 in 2020. Etsy’s P/E was around 30x at the end of 2017 and has fluctuated in 2018-19. It was recorded at 63x at the end of 2020 but has decreased slightly to 55x currently.

How Is Coronavirus Impacting Etsy’s Stock?

The online commerce sector saw a boom in 2020 as the onset of the pandemic led people to shift their buying preferences to online websites as opposed to visiting brick and mortar stores. This momentum continued for Etsy in 2021 as witnessed by its Q1 2021 results. For the first quarter GMS rose by 132% to $3.1 billion compared to $1.3 billion in the same period of the previous year. Net revenue increased by 141% to $550 million while Net Income increased 11.5x to $143 million primarily due to better operating margins and a tax benefit of $14 million. Etsy’s stock witnessed a sell off after its Q1 2021 results, as their Q2 2021 guidance shows a deceleration in its GMS along with the rest of the e-commerce compared to the tremendous growth rates of Q2 2020, which was the height of the pandemic in the US. We believe this sell-off in the past few days has made the stock attractive with the consensus analyst estimates expecting the stock to grow up to 40% from the current level of $159 as the company continues improving its operating margin and consumers shift toward online commerce continues.

For further comparison among peer groups, it is helpful to see how they stack up. Etsy Comparison With Peers summarizes how Etsy compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.

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