Upside in Etsy Stock Is Still Far From Overdone

Etsy (NASDAQ:ETSY) has become one of the hottest, most unstoppable stocks on the market. The last time I weighed in on Etsy stock, I said, “More than likely, there’s even more upside ahead, as consumers flock to the online store for everything from jewelry and clothes to home décor. That said, from here, I believe the stock could run to $150 in the near-term.”

etsy logo on a grey wall
Source: quietbits /

That was on July 7, as Etsy stock traded at a low of $110.80.

It’s trading around $130 and could easily still run to my target price of $150 a share, near-term.

Growth Does Not Appear to Be an Issue

For one, more folks have just begun to shop strictly online.

In fact, the demand for online shopping – “which Baird estimated could represent a $200 billion annual tailwind – could be a permanent shift in consumer behavior.” If true, that could send Etsy stock even higher than $150, near term.

Wedbush analyst Ygal Arounian also argues the pandemic led to big behavioral shifts in consumer shopping behavior. “Many consumers won’t go back to physical store shopping as they did before. The retail landscape will look dramatically different in the coming years.”

Two, CEO Josh Silverman said Etsy is “becoming more top-of-mind as a place you can go to buy almost anything. I think that Etsy is becoming much more mainstream.”

Earnings Explode Thanks to Online Surge

Three, Etsy blew earnings out of the water with profits up more than five-fold. The company earned $96.4 million, or 75 cents a share, up from 14 cents a share year over year. Revenue was up 137% to $429 million.

Yet, analysts were only looking for 39 cents on sales of $330 million.

While face mask sales were a big sales driver, other segments saw monster growth, too. For example, home furnishings were up 128%, crafts rose 138% and personal care items gained 187%. In addition, gross merchandising sales were up 147% year over year.

Even more impressive, the company expects revenue to grow 85% to 115%, which translates to a revenue range of $366 million to $426 million. Better, these positive trends are very likely to continue for the foreseeable future.

“Events of the last few months have driven dramatic shifts in consumer shopping habits, which we believe will increase the total available market opportunity for Etsy, particularly given our powerful, purpose-focused brand, the agility of our vibrant two-sided marketplace, and our unique competitive advantages,” Silverman added.  “So far, we’ve seen our strong second quarter trends extend through July. We are choosing to take this opportunity to make significant investments today that we believe can continue to provide opportunities for growth in 2021 and beyond.”

CFO Says Investors Can Expect Even Better News

CFO Rachel Glaser argues face masks aren’t the only major catalyst driving growth. Home furnishings grew more than $700 million in the latest quarter, representing growth of more than 128%, as noted by Barron’s contributor Teresa Rivas.

Also, Etsy is investing in data analytics and machine learning to personalize recommendations for consumers. Plus, “The line between online and offline has almost disappeared,” she says. “We believe our opportunity is a T as in trillion, not B as in billion.”

The Bottom Line on Etsy Stock

The pandemic has significantly reshaped the way millions of consumers shop. With that trend likely to stick around for quite some time, it could drive monster growth for e-commerce giants like Etsy. I strongly believe Etsy stock could easily hit my $150 a share target, near-term.

Longer term, if the company can continue to grow as strongly as it has, Etsy could be a $500 stock – with patience, of course.

Ian Cooper, an contributor, has been analyzing stocks and options for web-based advisories since 1999. As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.

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