The ecommerce story just keeps getting brighter and Etsy (ETSY) is one of those companies that are at the leading edge of the movement.
Out of the same vein of Amazon (AMZN), I am increasingly optimistic about Etsy’s long-term prospects aided by monstrous secular tailwinds.
Heralded for its vintage and handmade goods, I have upped my targets to $150 which is a no brainer for a company that grows revenue more than 30% and one I believe will grow 80% in 2021.
The growing pie of ecommerce tells just part of the story.
In the throes of a hysterical once-in-a-century multi-faceted crisis, consumers have gravitated towards trusted and reliable retailers.
As a result, we can expect the top 10 ecommerce retail businesses to expand at above-average rates of 21.8% in 2020.
Amazon will gain even more US ecommerce market share this year, while Walmart's accelerating ecommerce success will put it directly behind Amazon for the first time.
Even though Etsy is no Walmart or Amazon, they are a known commodity with a growing number of repeat and loyal buyers which goes a long way in today’s ecommerce climate.
They have effectively elbowed their way clearing out a niche in personalized handicrafts that cannot be copied on a large scale.
In the U.S. alone, ecommerce will account for 19% of retail by 2024, up from 11% of domestic sales last year, totaling some $1.1 trillion.
Simply put, the bronco is out of the barn, and many consumers are not inclined to return to the physical store experience.
Ecommerce has also validated themselves as models that work as good as the in-store experience or better.
Before the sushi hit the fan in March, most ecommerce outfits were projecting unspectacular ecommerce growth of 2-3% to $6 trillion in total US retail sales by the end of 2020.
After updating models, we now expect there's to be a 10.5% decline in total retail spend, with a 14.0% drop in brick-and-mortar.
Ecommerce has performed admirably and is poised to grow 18% following a 14.9% gain in 2019, further signaling the pivot towards digital.
Consumers have downloaded Etsy’s app at rapid rates further hinting that this boost in revenue has staying power.
Shares of Etsy have more than tripled from a March low and are trading at record levels. The stock is up more than 130% this year easily outperforming the broader Nasdaq index.
Etsy's quarterly revenue grew 32% year over year to $1.4 billion and when The Centers for Disease Control recommended the use of face masks to thwart the spread of the coronavirus, masks flew off the digital shelves.
CEO Josh Silverman aptly described the situation in Etsy's Q1 earnings call saying, “It was like waking up and discovering that it was Cyber Monday.”
Even excluding face masks, April sales were still up 79% from April 2019. All told, the company expects upcoming Q2 results to show an 80% to 100% year-over-year gain for gross merchandise sales. And it anticipates revenue growth of 70% to 90%.
As masks become mandated by state governments because of record coronavirus cases, Etsy is the go-to platform for personalized masks.
It goes to show that a native digital strategy might be the best of the bunch in 2020 and as masks are mandated by state governments, Etsy will harvest the low-hanging fruit with its army of personalized mask sellers on its platform.
This will truly be a year Etsy will never forget tattooing them firmly in the digital realm as a legitimate ecommerce juggernaut.
