For Etsy Inc Stock Simple and Straightforward Proves Best

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ETSY stock - For Etsy Inc Stock Simple and Straightforward Proves Best

Source: Meaghan O'Malley via Flickr (Modified)

For just about every retailer on the planet, keeping out of Amazon.com Inc.’s (NASDAQ:AMZN) firing line has been a top priority. So when the e-commerce giant announced plans to create its own “handmade” section, investors started to worry about online craft marketplace and companies like Etsy Inc. (NASDAQ:ETSY). However, despite Amazon’s entry into the space, ETSY stock has been completely unphased — delivering excellent growth and impressing investors.

The firm’s days of impressive growth don’t look likely to end any time soon either, based on management’s guidance, and ETSY looks poised to continue delivering impressive gains over the next year.

Trust in Management

One of the reasons ETSY has been so successful this year has been the fact that management is committed to its major growth initiatives. The firm has made several hard choices that have paid off by keeping the focus on creating a leaner, more efficient organization.

In 2017, John Silverman took over as CEO and, since then, we’ve seen an impressive turnaround. He eliminated much of the company’s staff and shut down programs that didn’t contribute to ETSY’s overarching goal — to sell more merchandise. That strategy appears to be paying off and ETSY stock’s rapid rise is proof of that.

The firm’s most recent earnings report showed revenue rising more than 20% for the year and gross merchandise sold was up 17.8% in the fourth quarter of 2017 compared to the year-ago figures. Those results cemented the fact that ETSY successfully fended off Amazon’s advances and gave investors confidence to bet on the stock.

Moving Forward

Silverman’s strategy has given ETSY stock a boost, and the firm’s gains are likely to continue as management digs in further. This year, we can expect to see Etsy significantly improve its search function, something that is likely to propel merchandise sales even higher and make the site much more user-friendly.

The search revamp is necessary in order for the company to continue beating out Amazon, because it will make a marked difference to both merchants and customers. Merchants have been loyal to Etsy even though there are other options out there and that has been a key driver of the firm’s success. However, that won’t last forever, especially if merchants find that their items aren’t showing up in relevant searches.

The same is true for customers. Etsy has benefitted from shifting consumer preferences over the past few years and unique, boutique-style goods are a hot commodity right now. That plus the rising popularity of online shopping has been a major tailwind for Etsy, but people who shop online are looking for convenience and ease, so search reliability will be a big factor in retaining them.

Getting Expensive

While ETSY stock does offer investors great long-term growth potential, it’s worth noting that the stock has gotten considerably more expensive over the past year. At $30.28 per share, the firm is not only trading near 52-week highs, but it’s getting toward some of the loftier price targets that analysts dished out earlier this year.

With a price-to-earnings ratio of 72.6, investors are expecting a great deal of growth from the stock. Those lofty expectations mean that ETSY stock has a lot to lose should it face any bad news or turn out quarterly results that don’t live up to all the hype.

Should You Buy ETSY stock?

At $30 per share ETSY stock is getting a little too expensive. The firm still has its problems — its wholesale division has been struggling a bit and there’s always the threat of merchants branching off on their own. After all, it’s become easier than ever to set up a business and sell online using a combination of a self-run website and social media platforms like Facebook Inc. (NASDAQ:FB).

With that in mind, investors who are interested in ETSY stock might want to wait for a pullback before adding the firm to their portfolios. In March, a wider market pullback among tech stocks caused ETSY to dip down to $26 per share, creating an excellent entry point — something that could happen again considering the volatility the markets have been experiencing over the past few months.

ETSY certainly isn’t a bad long-term play, but you might want to wait for a better entry point before jumping on board.

As of this writing, Laura Hoy was long FB and AMZN. 

Marie Brodbeck has a Finance degree from Duquesne University and has been a financial journalist for more than a decade. Her work can be seen in a variety of publications including InvestorPlace, Benzinga, Yahoo Finance and CCN.


Article printed from InvestorPlace Media, https://investorplace.com/2018/04/etsy-stock-simple-straightforward-proves-best/.

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