When stock-market participants think about ways to profit from the face-mask trade, Etsy (NASDAQ:ETSY) generally isn’t the first name that comes to mind. Yet perhaps it ought to be, since masks could play an important part as the company reports its earnings data on Aug. 5. This could also impact the overall price of Etsy stock.
The onset of the novel coronavirus created some major challenges for America’s businesses. One might suspect that a marketplace for handcrafted items would have struggled during a global pandemic. However, Etsy and its merchants have adapted and that has been key to the company’s resiliency.
Granted, there are companies out there whose primary focus is to crank out face masks as quickly as possible. However, those companies probably don’t produce masks that have the special touch that only a handcrafted item can provide.
Will Etsy stock pop or drop after the earnings announcement? Wall Street has high expectations, but don’t be surprised if Etsy delivers in its earnings and revenue results.
A Closer Look at Etsy Stock
Momentum-focused traders should be absolutely delighted at the pace at which Etsy stock has rebounded from its March 20 bottom. Indeed, the stock has posted impressive gains since it touched its 52-week low price of $29.95.
That was less than six months ago, and by the end of July Etsy stock was already up to $118 and change. The trajectory has been relentlessly to the upside, almost suggesting that there’s a bidding war among traders.
Value-oriented investors might take a tone of caution, and that would be perfectly understandable. All stocks have to take a breather at some point. But then, the upcoming earnings report could push the Etsy share price to the next level.
If you’re worried about missing out on this key event, you could consider taking a small position in Etsy stock. That way, you can add to your position if the price dips after the earnings release.
Unlikely Mask Makers
Credit should be given to the Etsy merchants who stepped up to the plate and quickly shifted their businesses towards the production of face masks.
After all, masks probably weren’t what they were making and selling prior to the pandemic. Yet, many handicraft makers heeded the intense call for face masks in April, when the demand was really starting to ramp up.
On April 7, an Etsy representative reported a number of facts and statistics that illustrated the importance of face masks during this time:
- From April 4 to April 6, Etsy users collectively searched for face masks 9 times per second on average, for a total of more than 2 million searches.
- Etsy’s merchants were selling hundreds of thousands of face masks on a daily basis during that time.
- There was a three-fold increase in the number of shops on Etsy that were selling face masks daily.
- Within a two-week period, the number of sellers on Etsy offering face masks increased five-fold to nearly 20,000.
- For two weeks, the most frequently searched term on Etsy was “face mask.”
What Wall Street’s Expecting
Not everyone wants the clinical-looking face masks that other manufacturers have to offer. Etsy merchants’ ability and willingness to create masks with a more fashionable appearance will probably have a positive impact on the company’s second-quarter earnings data.
I suspect that the experts might not have fully factored all of this into their estimates. The analyst consensus for Etsy’s second quarter is $326.7 million in revenues along with earnings of 39 cents per share.
Were the so-called experts duly impressed with the way Etsy’s merchants collectively mobilized and stepped up to provide masks on demand? If this aspect of Etsy’s second-quarter sales is underappreciated by analysts, then this could set Etsy stockholders up for a pleasant surprise on earnings day.
The Bottom Line
Making masks isn’t just about functionality. There’s an aesthetic aspect as well, and that’s where Etsy’s craft makers have excelled during the coronavirus crisis.
This source of revenues might not be fully priced in to the analyst community’s projections for Etsy’s quarterly earnings data. If so, then traders can purchase shares of Etsy stock in anticipation of forecast-beating results.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, David Moadel did not hold a position in any of the aforementioned securities.