Etsy Is a High-Flier Among E-Commerce Stocks

Shares of e-commerce retailer Etsy (ETSY) have surged by +74% from their 2-1/2 year low in mid-June, far outpacing other e-commerce retailers, such as Amazon.com (AMZN), Shopify (SHOP), and eBay Inc (EBAY).  Etsy is outperforming other e-commerce retailers as its business model helps it evade much of the inflation that has pushed up costs at other online merchants.

Like most e-commerce stocks, Etsy plunged from a record peak last year that was reached when the pandemic limited in-person shopping and forced consumers to purchase most things on e-commerce.  However, Etsy serves as a platform for artisans to sell their wares, meaning the company doesn’t have to spend big on warehouses or inventory as a traditional retailer does.  Global X ETFs said, “the nature of Etsy’s business model has been a large advantage for the company, especially during the holiday season.”

E-commerce stocks soared to record-high valuations during the pandemic.  However, now that economies have reopened, the stock market fallout from the bursting of that bubble has been severe.  In addition, rising inflation has prompted the Federal Reserve to raise interest rates, sparking an investor exodus from high-valuation stocks.

According to Bloomberg data, analysts predict sales growth for Etsy of +7.7% this year, well below last year’s +35% surge.  However, analysts see growth re-accelerating to +9.2% in 2023, +13% in 2024, and +15% in 2025.  In addition, Bloomberg Intelligence said, “marketplaces like Etsy have an advantage over brands and retailers that own inventory and fulfill their own orders as they can bypass the growing inflationary pressures from warehouses to shipping.”

The CEO of EQM Indexes said, “while the market chalked Etsy up as a ‘pandemic play,’ selling items like custom masks during the height of the pandemic, Etsy used its buyer and seller base to expand its platform.  It is the perfect example of an online retailer that has come out of the pandemic environment stronger and better, far exceeding investor expectations.” 

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