ETSY Stock Flying High on This One Factor

ETSY stock
iStock.com/suwichaw

Etsy Stock Gains on Multiple Growth Catalysts

We all love gifts that are unique and creative. Many times, we just do not want to consider mass-produced gifts at all. There are few businesses that cater to our desire for the “special” and make good money for their investors doing so. Etsy Inc (NASDAQ:ETSY) is one of those companies.

Etsy is an online marketplace for creative goods. With its vast collection of handmade, unique factory-manufactured, and vintage items, Etsy connects buyers and sellers from all around the world.

This factor has been—and should continue to be—the driving force behind ETSY stock.

With the aim of building an authentic and community-focused global and local marketplace, the company has come a long way. In 2017, the Etsy marketplace connected 1.9 million active sellers to 33.4 million active buyers.

Etsy believes that its big opportunity lies in the fact that more people are opting for online shopping. Moreover, many consumers are looking for unique items as an alternative to mass-produced goods.

According to market research firm eMarketer, global retail e-commerce sales will reach $4.5 trillion by the end of 2021. (Source: “Worldwide Retail and Ecommerce Sales: eMarketer’s Updated Forecast and New Mcommerce Estimates for 2016—2021,” eMarketer, January 29, 2018.)

Moreover, within this retail e-commerce market, the opportunities for “special” purchases are significant. Etsy’s top retail categories include “Clothing & Accessories,” “Home & Living,” and “Jewelry.”

Etsy estimates that there’s a $155.0-billion online market opportunity and a $1.3-trillion market opportunity when offline shopping is included. (Source: “2017 Annual Report,” Etsy Inc, last accessed July 23, 2018.)

The company is executing its strategy well, as is evident from its recent first-quarter results. Gross merchandise sales (GMS) went up for the third quarter in a row, growing by 19.8% year-over-year to reach $861.1 million.

Total revenue grew by about 25% through the year to reach about $121.0 million. Active sellers were up by nine percent and active buyers grew by 17%. (Source: “Etsy, Inc. Reports First Quarter 2018 Financial Results,” Etsy Inc, May 8, 2018.)

The recent announcement by Etsy that it was updating its transaction fee from 3.5% to five percent bodes well for Etsy stock. The five-percent transaction fee will be applied to the shipping price, and this means more revenue in the coming years. (Source: “Etsy June 14, 2018 Update,” Etsy Inc, June 14, 2018.)

The ETSY stock price has gained about 200% in the last year. The following stock chart shows this spectacular run.

Chart courtesy of StockCharts.com

Analyst Take

As mentioned earlier, Etsy is a global marketplace for unique and creative goods. Buyers around the world come to the Etsy platform when they want something special.

So far, the company has maintained its edge in the very competitive online retail space. Its good financial performance can give us confidence that this trend will most likely continue.

Investors who believe in the potential of e-commerce will likely not want to miss the opportunity that Etsy stock presents. As the stock currently trades at record highs, investors may want to consider ETSY stock on any sign of price weakness.