Should You Invest in Etsy?

OVERVIEW

Etsy Incorporation is a company based in the United States. The company operates an e-commerce platform around the world. The company allows sellers to place products for sale on their website and allow consumers to purchase their products. The process includes the use of Etsy Shop Manager, Etsy Payments (their payment processing program), Etsy Ads (an advertisement platform), and Etsy Shipping Labels.

Why You Should?

  1. Etsy has seen a spike in demand during the COVID-19 Pandemic as businesses around the world shut down their brick and mortar storefronts and create new virtual storefronts like an Etsy shop. Consumers can also support small and local businesses off Etsy, which they have been doing during this pandemic. This has benefited the company’s future growth and has also benefited investors.
  2. Long before this pandemic, the world of retail has seen shifting consumer trends, where consumers spend more money online through e-commerce sites and less in brick and mortar storefronts. Etsy has seen rising demand for the products and services that it offers due to this massive shift in consumer trends. This has seen the company quickly grow and has also benefited investors.
  3. Etsy usually reports its strongest numbers during the holiday season as sellers put more products on their respective Etsy shops and as consumers flock to the site to buy them. This year, consumers will do most of their holiday shopping online, further benefiting the company’s financial results for the next couple of quarters. This will also benefit investors.
  4. Etsy will see its stock price further rise if a stimulus package from Washington passes. This will give money to the small businesses to further expand their presence on their Etsy shops and will also give consumers more money in their pockets to purchase products off Etsy. This will benefit the company’s financial results and will also benefit investors.
  5. Etsy has seen rising revenues and profits over the past couple of financial years due to the reasons mentioned above. The company can build a stronger balance sheet with these results. This will help the company further expand its presence across the markets that it operates in. This will also benefit investors. In the financial year of 2019, the company reported revenues of around 818.4 million and profits of around 95.6 million. Both of these metrics are higher than what the company reported in the financial year of 2018 when they had revenues of around 603.7 million and profits of around 77.5 million.

Why You Should Not?

  1. Etsy faces tough competition from several other companies that allow small businesses to create virtual storefronts, like eBay, Facebook’s Instagram Shops, Shopify, and Amazon. Other e-commerce companies like Amazon, Walmart, and many others might hurt the company’s growth in the future.
  2. Etsy trades at over 140 dollars due to investor confidence in the company during this pandemic. However, this means that it trades at a valuation of over 76 times earnings. This is fairly high and all this means is that the stock can be more volatile. Personally, I am waiting for the stock price to fall a bit before investing in this great company.

MY OPINION

In my opinion, I think that Etsy is a great company to invest in because of the impacts of the COVID-19 Pandemic on the retail industry, the possibility of a stimulus package, a possibility of a strong holiday season, and rising revenues and profits. However, an expensive stock price and tough competition might keep investors away from this company.

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