We talk often here about how the rate of technological progress gets faster every year. In fact, in the 21st century we will see almost 1,000-times the technological advances we saw in the 20th century.
That’s a good thing for the few investors who understand that they can generate massive wealth much faster than ever before by investing in technology … investors like you.
But that doesn’t mean there’s no downside to this exponential progress.
For one thing, that wealth is being concentrated into fewer and fewer hands. That’s because tech companies are able to employ fewer people, but make exponentially more profits than old-school companies.
Hence, the wealth gap … the Technochasm.
But exponential technological progress has other, less cataclysmic effects on society. Even if we try our best to embrace this shiny future, many of us feel a bit “left behind.”
We’re bewildered by the huge and growing mass of information and data that the internet spews out every day. Our eyes glaze over whenever we see the phrase “edge computing.” We can’t work our remote controls.
I joke (a little), but it’s true.
And so, millions of Americans – even as we check our smartphones 80 times a day – are taking up hobbies like gardening, baking, and woodworking to help us keep sane.
Not surprisingly, there’s a disruptive tech company out there that’s making big profits for itself – and its clients – off that instinct.
And so can you, by investing in this tech stock, which I believe is a solid long-term bet.
A Perfect Stay-at-Home Tech Stock
I’m talking about Etsy (NASDAQ:ETSY), the e-commerce website specializing in handmade and vintage goods.
The Brooklyn, New York-based company launched its initial public offering (IPO) back in 2015 and started trading around $25 per share. ETSY stock was initially a bust, with shares sliding into the single digits. However, the tech stock turned things around starting in 2018.
No the stay-at-home economy has lifted Etsy into the big leagues. Shares are up as much as fourfold over the past year as the quarantine has given Etsy a perfect opportunity to become a household name.
Etsy is benefiting from the confluence of two powerful trends.
First, with unemployment soaring, millions of Americans are trying to augment their incomes. Etsy offers a fine way for people to turn their hobbies into a side hustle. It’s always good for Etsy to have more unique product creators on their site.
Second, the stay-at-home consequence of the pandemic has swelled the size of Etsy’s active market. Millions of Americans are sheltering in place and shopping for goods online, rather than driving to the mall or big box store, which means that Etsy now has more customers than ever.
The company’s website is like a digital crafts fair. It offers unique fashion accessories, organic fragrances, and a broad array of other handmade and vintage items. Plus, creators can quickly list new products, like COVID-19 masks.
At the company’s inception, many investors believed its focus was too narrow to be hugely successful. Remember that Etsy flopped out of the gate. By mid-2017, Etsy’s year-over-year revenue growth slowed to just 18% and it appeared the company might never reach critical mass.
Etsy had fantastic products, but it struggled to help them reach visibility with customers. As Etsy improved its capabilities there, the overall financial picture brightened. By late 2018, the company boosted its revenue growth rate to 40% annually and started reporting strong quarterly profits.
Etsy never wavered from its commitment to handmade and small-batch goods. And now, that “narrow” focus looks like genius.
Etsy possesses a cachet in the marketplace that large-scale online vendors like eBay (NASDAQ:EBAY) and Amazon (NASDAQ:AMZN) lack. Nearly 90% of Etsy customers surveyed agreed that Etsy has items you simply can’t find anywhere else. By contrast, Amazon has been dogged by complaints about low-quality merchandise coming in from overseas.
You won’t have that problem if you buy on Etsy.
Etsy describes its mission as “keeping commerce human.” There is an appeal to that as folks feel increasingly threatened by the Technochasm we talk about here. The stay-at-home trend has only accelerated this phenomenon.
In the first quarter, Etsy saw active sellers grow 26.4% year-over-year. The company has been a lifesaver for folks who are now unemployed … or underemployed.
Traders may look at the stay-at-home stocks and think that share prices will go back down as the pandemic ends. Don’t count on that happening with Etsy.
Congress let the enhanced unemployment benefits program lapse recently. As government support tapers off, it highlights the role that Etsy can play as a bridge for people between jobs.
Crafting a Profitable Future
Rarely do you find a company whose mission is so closely aligned with the current zeitgeist.
People are spending money on furniture and home improvement as they cocoon at home. Etsy has that. And given the virus, few people are going to flea markets or garage sales right now. If you want to find something striking, unique, and unexpected, Etsy is the place.
Meanwhile, there’s never been more talent on Etsy’s site creating inspired new designs. As Etsy CEO Josh Silverman explained recently: “For our sellers maybe other forms of employment are under stress. The opportunity to earn a living selling on Etsy is really powerful right now.”
Although this tech stock has been on a tear, I believe it still has plenty of upside over a two- or three-year time frame. The company has only captured 5% of an estimated $150 billion total addressable market. So the company could triple revenues and still take up only 15% of the overall market.
In other words, Etsy could have even bigger years ahead. The past few months have validated its business model and made Etsy a core part of many peoples’ lives. Investors will enjoy the benefits of that achievement long after the pandemic has ended.
Of course, Etsy is just one tech stock that I think has huge profit potential over the next few years.
In fact, I’ve identified the one company that I believe will benefit most from exponential technological progress.
In my brand-new presentation, I’ll tell you about it. Check it out here.
P.S. If you pay attention to the news, you might think the coronavirus and the horse race between Joe Biden and Donald Trump are the only big stories out there. However, the media is totally missing what is by far a bigger election year story.
You see, an alarming new trend taking shape in America is making a lot of people really wealthy… and at the same time making others poorer. I believe this will be the No. 1 factor affecting your money over the next few years. If you haven’t seen this or heard about what’s happening in your hometown, I can show you exactly what’s happening.
Eric Fry is an award-winning stock picker with numerous “10-bagger” calls — in good markets AND bad. How? By finding potent global megatrends… before they take off. And when it comes to bear markets, you’ll want to have his “blueprint” in hand before stocks go south. Eric does not own the aforementioned securities.