Etsy Inc

Update - I first mentioned Etsy in edition #3 of this newsletter as a stock with strong momentum. Since then its continued to deliver excellent numbers, announcing revenue growth of 128% in October. Behind the headline number: an increase in sales per seller (+18%), active listings (+20%), active sellers (+43%) and active buyers (+56%). This is a company with the wind in its sails.

Watch out for - It’s an interesting time to revisit Etsy for a few key factors. First, we’ve just gone through the holiday season. Etsy differentiates on providing unique goods from unique sellers, so naturally many of the products on offer make for interesting gifts. Anecdotally, I noticed more gifts being purchased from Etsy this year than ever before. Second, sales of fabric face masks have started to decrease as a proportion of sales. Whilst expected, this will likely continue this year as vaccines are rolled out. Finally, CEO Josh Silverman has highlighted the significant jump in Etsy’s brand awareness over the last few months. He has followed this up with marketing dollars - increasing spend to $127m in the last quarter (up 153% YoY). For these reasons, I’m expecting Etsy’s next quarterly report to be of particular interest. It should be released in January or February.

Thesis - Etsy is an e-commerce marketplace with a focus on hand-crafted goods, allowing individual creators to reach large numbers of potential customers. Their earnings report showed a business that is flourishing in this environment, with revenue up 137% YoY (93% without sales of masks), active buyers up 41% and active sellers up 35%. This is a business which is not just maintaining, but aggressively accelerating in all areas. Like Shopify and Wayfair (online furniture retailer), they have managed to carve out a niche in e-commerce which seems resistant to Amazon, the dominant e-commerce player. Its stock price has also shot up since it’s March low, up 4 times, giving it a full valuation. But with a market cap of $16bn, the long-term investor could see this continue to grow even further as e-commerce continues to be a dominant and resilient trend.