Will ETSY continue to grow post-pandemic?
The pandemic has worked wonders for e-commerce businesses. Things have never looked better for some companies, and it looks like there is no holding them back. Etsy (NASDAQ: ETSY) has had a fantastic run, with ETSY stock up 81% over the past year. It was trading at $50 in January 2020 and went to $200 in January 2021, and is trading close to $292 today.
I believe this is only the beginning for Etsy. The company has marked its presence in the industry and showed its strength during the pandemic, but there is a lot to look forward to. There will be a growth surge, and ETSY stock will go higher in the coming year. Let’s take a look at the catalysts that will get the stock moving.
Massive Growth Opportunity
Etsy is a craft and homemade goods marketplace and attracted a new wave of users during the pandemic. Etsy sellers moved swiftly to allow consumers to meet their needs, including creating masks when they were in short supply. The company recently reported the third-quarter results and beat estimates, but consumers are now returning to physical stores, which might affect Etsy’s revenue.
The companies that benefitted during the pandemic are reporting a slowdown since the lockdown restrictions eased. This uncertainty can be seen in the earnings report. The company reported adjusted earnings of 62 cents and revenue of $532 million, a 17% rise. The marketplace revenue was $395.5 million, and the service revenue was $139 million. It reported a cash balance of $619 million, which is due to the asset-light business model. The high liquidity allows Etsy to invest in marketing and strategies that help the business.
Interestingly, the company is catering to a large number of habitual buyers. These are consumers who have shopped from the platform at least six times in the past year. The company has 8 million habitual buyers. It is a fantastic number for shareholders as the shopping season begins now. Etsy stock has set the stage for the holiday season.
For the fourth quarter, the company expects revenue of $660 million to $690 million and sales in the range of $3.9 billion to $4.1 billion.
Wall Street is bullish on ETSY stock
Citi analysts raised their price target on ETSY stock to $320 per share with a buy rating. The analysts added that shoppers change their behaviour in a post-pandemic world, and Etsy has been able to generate brand awareness which will serve well in the coming years.
Wedbush also raised the price target to $310 and is highly optimistic about the stock. It has an outperform rating for this stock. Further, Jefferies analyst John Colantuoni has a buy rating on the stock with a price target of $220.
Guggenheim analyst has a buy rating on the stock with a price target of $330. The analyst carries a favourable view of the marketplace model of the company and believes it has the ability to become more profitable in the coming period. Needham also has a buy rating on the stock with a price target of $325.
The Bottom Line
Etsy has shown its potential in the past year and is enjoying the gains made during the pandemic. I believe the company will continue to enjoy a large user base and rise in revenue. Even if people move to physical stores due to easing lockdown restrictions, Etsy does not have much to lose. The company has a unique business model, and it will continue to attract sellers and buyers to the platform.
The dip in the stock is a good buying opportunity as there is massive upside potential. Anything below $300 is a good level to enter.
Not Investment Advice
Note: Views expressed are those of the writer. The author does not own any stocks mentioned. The article is information, not advice. Share prices can rise and fall. Past returns are not a guide to the future. Please do your own research.