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Is Etsy a buy?

Its time to breakdown a new S&P 500 member. Here is the breakdown of $ETSY otherwise known as Etsy Inc.

Current Price: $113.50

52/Wk High: $141.41

52/Wk Low: $29.95

Read below for the breakdown.

Etsy is an online marketplace platform that offers the ability to connect buyers and sellers of goods. Etsy also delivers services that benefit starting entrepreneurs.

Due to COVID-19, many are being forced onto the online market place and Etsy has benefited from the trend as has the rest of the cloud and technology names. 

The tailwinds of COVID-19 gave Etsy a huge boost and that was definitely represented in the Q2 report. 

$ETSY reported a beat with an EPS of $0.75, smashing the EPS consensus estimate of $0.39. 

Furthermore, revenue blew out expectations as well. Second-quarter revenue was reported at a whopping $429 million which represents 137% YOY growth. 

Digging further into the last reported earnings, Q2 adjusted EBITDA came in at $151 million and GMS (Gross Merchandise Sales) landed at a total of $2.7 billion, up 147% YOY. 

Not only were earrings great but the balance sheet is not bad. Currently, Etsy has a total debt level of $861 million but a solid cash on hand position of $1.043 billion as of June 30th.

Moving into the outlook management delivered a positive forecast for Q3. Etsy management expects revenue for Q3 to fall in a range of $366 million to $426 million which is a YOY growth of 85% to 115%.

On top of that, the Q3 adjusted EBITDA margin is expected to fall between $111 million to $127 million along with Q3 GMS falling between $2.2 billion and $2.5 billion.

Given all the positivity and the rapid growth, analysts are extremely bullish on $ETSY. Currently, the average price target sits at $150.19/share, representing a 33.25% upside. 

Secondly, the high price target is $170.00/share, representing a 50.83% upside and the low price target is $68.00/share, representing a -39.67% downside.

Along with the analysts, the big money is also very bullish on Etsy. Currently, 91.03% of $ETSY is owned by institutions. Top holders include BlackRock Institutional Trust, The Vanguard Group, and Wellington Management Company.

It is also important to note that $ETSY currently trades at a price to earnings ratio of 95.66 and a price to sales ratio of 11.73.

Moving into the technicals the six-month charts seem to be flashing opportunity. The six month RSI sits at a low 37.50 which is quite attractive. On the otherhand, as we all know RSI is not everything.

Taking a closer look the six-month MACD is within the range of 1.96 to -0.72 forming strong downward momentum. Finally, the six-month CCI sits at -171.44 and $ETSY trades a large 28.70 points off its highs.

Overall, I like Etsy for the long term. It is a rapidly growing platform and seems to be a solid COVID-19 outperformer. 

On the otherhand, if the technology sector sell-off continues shares will likely be dragged down with it therefore creating an even better opportunity in the short term. 


Disclaimer: This is not direct financial advice, simply opinion based on independent research. Luke Donay and Running With The Money are not responsible for any investment made based on the published information. 

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