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Is Etsy a buy after a big year?

It's time to come back and take a look at another e-commerce name. Here is the breakdown of $ETSY, better known as Etsy.

Current Price: $128.70

52/Wk High: $154.88

52/Wk Low: $29.95

Market Cap: $16.2 billion

Read below for the breakdown!

Etsy is a diversified retail company providing a platform in which users can buy and sell goods of nearly every type.

Due to COVID-19, Etsy has seen an explosion of growth, reporting 69.6 million active buyers and 3.7 million active sellers as of September 30th.

Furthermore, Etsy throughout the third quarter saw a sizable influx of 14.8 million new buyers and reactivated buyers according to the company's most recent earnings report.

Taking a look at the company's most recent earnings, Etsy beat Q3 expectations. Etsy reported a beat, with an EPS of $0.70 (Up 483.33% YoY) versus the expected $0.60 EPS consensus.

Etsy also reported stellar growth across the board, with GMS (gross merchandise sales) excluding masks growing a whopping 93% to $2.2 billion (masks made up 11% of GMS). 

When it comes to the strait numbers Etsy saw Q3 revenues come in at $451.5 million, representing growth of 128.1% year-over-year. 

Not only that, but Etsy also saw a gross profit of $331.3 million (Up 156.8% YoY) and income from operations of $118.2 million (up 730% YoY). 

On a final note, Etsy also saw a solid net income level of $91.8 million in Q3 but experienced increased operating expenses due to marketing investments.

Etsy management also delivered solid guidance for the fourth quarter. Management expects GMS year-over-year growth to range between 65% to 85% ($2.7 billion to $3.1 billion) and revenues to grow 70% to 90% ($459 million to $513 million).

Shifting into the balance sheet the numbers are solid but an increase in debt is worrying.

Total Debt: $1.110 billion

Total Liabilities: $1.548 billion

Total Assets: $2.215 billion

Cash & Short Term Inv: $1.525 billion

Due to the solid numbers this year, Etsy has seen its valuation soar, causing some to ask whether Etsy is still a buy.

Price to Earnings: 79.85x

Price to Sales: 12.46x

Price to Book: 24.18x

Price to Cash Flow: 39.82x

Given the excellent growth throughout the past year, analysts have turned extremely bullish on Etsy, with the mean price target currently sitting at $156.42/share, representing 21.40% growth.

Etsy’s high price target is $170.00/share, representing a 31.94% gain, while the low price target is $74.00/share, representing a -41.57% loss.

The big money is just as bullish as the analysts. Currently, 84.21% of Etsy is owned by institutions. Top holders include The Vanguard Group, BlackRock Institutional Trust, and Wellington Management Company.

On the technical side of things, Etsy could be flashing an opportunity after its most recent pullback. According to the six-month charts, the MACD is in strong downward momentum, within a range of 0.596 down to -1.2346.

The six-month charts are also indicating an RSI of 47.59 and CCI of -84.1215 both of which are solid locations to start a position. It is also important to note that Etsy currently trades roughly 25 points off its highs.

In short, I am a fan of Etsy due to the company's rapid growth throughout COVID-19, expectations for future earnings, and the stock's most recent pullback.

Long-term Etsy is a solid option to cash in on the e-commerce boom but in the short term, I urge caution due to the market's high volatility and current rotation into value names.


Disclaimer: This is not direct financial advice, simply an opinion based on independent research.

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