Some shoppers might be familiar with Etsy (NASDAQ:ETSY), a global marketplace for creative goods (hand-crafted products, vintage items, etc.). It’s not the most obvious e-commerce investment, but traders ought to seriously consider ETSY stock.
What makes Etsy stand out, besides its low fees for sellers, is its decidedly human element. The company even boasts that its mission is to “Keep Commerce Human.”
That’s all warm and fuzzy for shoppers and sellers, but investors tend to think differently. They want to know if the company has growth potential and what it’s doing to expand its market footprint.
No problem – those are valid concerns and they deserve answers. And thankfully, there’s evidence that Etsy is moving in the right direction, taking in revenues and bolstering its share of the highly competitive e-commerce niche.
A Closer Look at ETSY Stock
If you ever need to identify a poster child of post-Covid-19 success, look no further. We’ve got a winner right here.
Like many other stocks, ETSY stock got slammed in March of 2020. The world was in a state of panic and investors dumped their holdings in practically every sector.
That turned out to be a mistake. Of course, it’s easy to say that with the benefit of hindsight, but it’s undeniable that the stock market staged an impressive rally.
Among the big gainers was ETSY stock, which ran up to a mind-numbing 52-week high of $251.86 on March 1, 2021.
Bear in mind, the stock was in the low $30s a year earlier. If your timing had been perfect, you could have reaped returns of more than 600%.
A retracement was practically inevitable after a run-up of that magnitude. So, ETSY stock pulled back, landing close to $185 on June 25.
Now, let’s conduct a quick-and-dirty valuation check. All of you value-focused investors should appreciate this.
Currently, ETSY stock has a trailing 12-month price-to-earnings ratio of 52.56. I won’t pretend that this is extremely low.
Value hunters might choose to wait for the share price to pull back another 10%. Just be aware that you could miss out on a prime opportunity as the stock has already declined from its peak price.
A Unique Growth Story
Is there really money to be made from the online crafts market? The first-quarter 2021 data proves that the answer is definitely yes.
For that quarter, Etsy reported consolidated GMS (gross merchandise sales) of $3.1 billion, up 132.3% year-over-year
Meanwhile, the Etsy marketplace GMS for the quarter totaled $2.9 billion, up 144.1% on a year-over-year basis.
Need more triple-digit growth stats? No problem: Etsy’s quarterly consolidated revenues were $550.6 million, up 141.5% compared to the same period of 2020.
In light of all that, I can’t blame Atlantic Equities analyst Daniela Nedialkova for initiating her coverage on Etsy with an “overweight” rating, or for viewing the company as a “unique digital retail growth story.”
Targeting Gen Z
Speaking of growth stories, it was recently reported that Etsy plans to acquire London-based resale fashion site Depop.
With a price tag of $1.625 billion, the takeover won’t be cheap. However, Etsy expects Depop to be accretive it top-line growth rate – and justifiably so, in my humble opinion.
In 2020, Depop generated $650 million in GMS and $70 million in revenues. Yet, there’s more to the Depop acquisition than the raw revenue numbers.
Really, it’s about targeting Generation Z (a.k.a., the Zoomers). Apparently, roughly 90% of Depop’s active users are under the age of 26.
Moreover, Depop is the 10th most visited site for U.S. Generation Z consumers.
So, even if you’re older like me and you don’t use Depop, that’s perfectly fine. There are plenty of younger shoppers who know Depop quite well, and have spent money there.
The Bottom Line on ETSY Stock
Clearly, Etsy plans to tap into a valuable market with the upcoming Depop takeover.
This should be viewed as great news for the shareholders.
It’s yet another reason to stand by Etsy as the company continues to prove itself as a serious e-commerce contender.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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.
