E-commerce company Etsy (NASDAQ:ETSY), which specializes in facilitating the sale of handmade and vintage goods, is a superstar in the stay-at-home economy. Yet, not everyone is a believer in Etsy stock as it has cooled off somewhat in September.
Skittish traders might choose to dump their shares if they feel that the Etsy stock bulls are showing signs of exhaustion. However, it wouldn’t make sense to sell a stock just because it has had a pullback, especially when the company has a firm financial foundation.
If anything, this could be a great opportunity to add some Etsy stock to your portfolio. Not only will the stock continue to ride the wave of e-commerce, but there is a face mask connection here as well.
It is interesting to consider that Etsy stock could benefit from cultural shifts during the novel coronavirus pandemic. And yet, the data indicates that this is precisely what is happening.
Etsy Stock at a Glance
Upon its initial public offering (IPO) in 2015, the price of Etsy stock was around $25 per share. That dollar figure seems absolutely quaint in 2020. Even during the scariest part of the coronavirus crisis, Etsy shares did not break below that price.
The share price did get fairly close, though, as it reached a 52-week low of $29.95. Suffice it to say that this was a price that we might never see again. By Aug. 5, Etsy stock was up to its 52-week high of $141.41.
Undoubtedly, some folks were shaken out of the trade as Etsy stock pulled back from that high point. Etsy shares are currently priced at $114.50, a far cry from their previous peak. Is this a sign that the bears are in control now?
Not necessarily. Overall, the trend is still to the upside until it is proven otherwise. Next, it is important to determine whether Etsy is in a strong fiscal position. Otherwise, the bulls will not have much gas in the tank.
Crafting a Solid Quarter
Quarterly financial data are a quick and easy way to gauge the health and viability of a business. So, how did Etsy’s online craft market fare during the second quarter of 2020?
The numbers are undeniably strong, I’m sure you’ll agree. Take a look:
- Revenues of $428.7 million, representing a 136.7% year-over-year increase.
- Gross profit of $317.4 million, up 159.1% on a year-over-year basis.
- Gross margin came to 74%, a decent improvement over the 67.6% recorded during 2019’s second quarter
- Non-GAAP adjusted EBITDA of $150.6 million, signifying an astounding 279.4% year-over-year increase.
- The number of consolidated active buyers grew by 41% year-over-year.
- The number of active sellers increased year-over-year by 34.6%.
Unmasking an Opportunity
As you marvel at those numbers, keep in mind that during this time, Etsy was dealing with the global pandemic just like every other business. Plus, Etsy had waived certain seller fees.
I’m not going to suggest that Etsy’s business model depends on face mask sales now. However, handcrafted mask sales have certainly benefited both the sellers and the company.
Believe it or not, in the second quarter, Etsy reported global market sales totaling $346 million in the face mask category. And amazingly, 112,000 sellers on Etsy sold one or more face masks during the quarter. Plus, face mask sales comprised roughly 13% of Etsy’s quarterly global market sales.
Face masks are going to be an essential personal item for the foreseeable future. Etsy and its sellers have adapted to this cultural shift, and they are generating sales while potentially making the world a safer place.
There is no need to worry as the trend is still to the upside for Etsy stock. Call it the “mask trade” if you’d like, but owning Etsy shares makes sense as the company’s sales and revenue growth remain undeniably strong.
On the date of publication, Louis Navellier had a long position in ETSY. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.