Having nearly tripled this year, Etsy (NASDAQ:ETSY) stock is having a say in the expanding e-commerce investment lexicon. The company’s second-quarter results, delivered Aug. 5, confirm as much. ETSY stock earned 75 cents a share in the June quarter, up from 14 cents a share a year earlier as sales swelled to $429 million, from $181 million a year earlier. Wall Street was expecting EPS of 39 cents a share on sales of $330 million.
Etsy isn’t just benefiting because so many consumers are embracing e-commerce in the face of the novel coroanvirus – a trend that was in place prior to the pandemic.
Rather, this online retailer, which serves as a platform for independent sellers, is thriving because so many of its merchants are tapping into the mask game.
Do enough quick headline scanning on Etsy’s second-quarter results and it would easy to come away thinking this company makes surgical masks. That’s how much fanfare (and revenue) masks are generating for the company this year.
To be sure, Etsy merchants aren’t hawking boring blue hosptial-type masks. They’re, astutely, tapping into the theme of “If I’ve gotta wear one of these things, might as well make it cool/fashionable.”
ETSY Stock Is More Than Masks
These days, it’s easy to be seduced by companies with Covid-19 leverage, be it testing, vaccines or masks. However, in the case of Etsy, masks mask longer-ranging opportunity and that’s actually a plus. Let’s be honest. When a vaccine emerges and life starts getting back to normal, the first thing going out the window are masks.
Good news: that’s not going to be a drag on Etsy. Just look at what the company had to say about second-quarter gross merchandise sales (GMS) ex-masks.
GMS growth excluding mask sales for the Etsy marketplace was 93%, up $1.0 billion year-over-year, and 14% of the Etsy marketplace’s overall GMS was from mask sales,” according to the company. “Excluding masks, homewares and home furnishings, our top category, was up 128% year-over year, jewelry and accessories was up 50%, and craft supplies was up 138%.”
Looking at homewares and home furnishings, that’s another way Etsy has Covid-19 leverage, though this trend is probably more durable than masks.
More Encouraging Factors
Folks can argue as to what the reasons are, but the fact is some metro areas are recently experiencing sizable outflows of population with many of the departed opting to move to the suburbs. In some regions, that’s leading to brisk activity in high-end residential real estate.
Bottom line is that while the U.S. is in a recession, low interest rates and the drive to get out of some cities is propping residential real estate. With many of those leaving cities taking on more space in the burbs, that’s more space for decorating and furnishings and that’s a boon for Etsy.
Another encouraging sign: in the quarter GMS per active user was up 5% year-over-year including masks. Ex-masks, the metric increased 6%.
“In the second quarter, the Etsy marketplace delivered 11.5 million new buyers and 7.2 million reactivated buyers who haven’t purchased in a year or more,” according to the company.
Another Positive for ETSY Stock
If mask mania and the move to the burbs isn’t enough to pique investors’ interest with Etsy stock, perhaps the following nugget will.
In an interview with Barron’s, Chief Financial Officer Rachel Glaser said the number of customers buying six or more times a year from Etsy surged 64% in the second quarter.
More than likely, that’s not six trips to buy a mask each, no matter how fashion-forward a mask wearer is.
In other words, Roth Capital, the latest research firm to chime in on Etsy, may not be far off with the $160 price target on the stock, which implies upside of 23% from the Aug. 6 close. That forecast could ultimately prove conservative.
Todd Shriber has been an InvestorPlace contributor since 2014. As of this writing, he did not hold a position in any of the aforementioned securities.
