Why Etsy Stock climbed 15% in the first half of 2021



What happened

Etsy‘s (NASDAQ: ETSY) The share price was volatile at the start of the year, but ended the first half of 2021 up 15.7%, according to data provided by S&P Global Market Intelligence.

Shares came in slightly lower than the year in June, but investors turned bullish after Etsy announced the acquisition of Depop and Brazil-based Elo7. These agreements are part of management’s strategy to create a “House of Brands” portfolio to connect consumers to more sellers and, in Elo7’s case, expand its reach to more geographic regions.

ETSY data by YCharts

So what

Etsy is looking to keep the millions of new active buyers it gained during the pandemic in the short term. The company is investing in brand marketing, data infrastructure, recruiting, member services and developer experience to support growth.

However, these investments could weigh on earnings for the next quarter, as management forecasts predict a sequential decline in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) within a range of 25% to 28%, compared to the adjusted EBITDA margin. by 33% in Q1. But Etsy still has a lot to do beyond 2021.

While the acquisitions of Depop and Elo7 will not shake things up in the near term, these markets could significantly improve Etsy’s already attractive long-term growth prospects. Depop extends Etsy’s reach to the fast-growing second-hand market, which is popular with Gen Z and Millennials. Elo7 gives Etsy a growth path in one of the e-commerce markets in the world. fastest growing in the world.

A business owner packages an order online for shipping.

Image source: Getty Images.

Now what

Etsy’s triple-digit growth is likely over. The company’s forecast calls for revenue growth to decelerate to 15% to 25% year-over-year in the second quarter. During the first quarter earnings call, CFO Rachel Glaser said: “Key macroeconomic metrics, such as TSA flight information, shopping mall traffic and Google mobility data , suggest that as states and countries reopen, activity and consumption in non-retail categories will pick up and this could imply increased headwinds throughout the rest of the year. ”

Yet the stock doesn’t trade at a very high valuation like other growth stocks and still looks like a good investment at these levels.

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John Ballard has no position in the stocks mentioned. The Motley Fool owns stock and recommends Etsy. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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