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Hype Asset of the Day | November 14th, 2022



Etsy, Inc. (NASDAQ: ETSY)

Etsy is an e-commerce platform focusing on handmade and vintage goods and items. The company occupies a very specific and lucrative niche in global e-commerce. Its focus on handmade, vintage, and speciality items is a key differentiator from other e-commerce companies. Even as Etsy has grown its family of brands, like the acquisitions of second-hand marketplace Depop and Brazil-based competitor Elo7 in 2021, it remained true to this central theme. Having beat Wall Street estimates in their recent quarter, Etsy has seen an increase in mentions by over 59% over the last day, encouraging investors to wonder what makes the company gain so much hype. Currently shares of Etsy trade at $113.96 per share.

Positive Hype

There are numerous reasons that Etsy has come to gain this much positive hype, here are some of them.


  • Revenue was up 12% year over year, non-U.S. GMS surged 9% from a year ago, and its net loss actually shrunk by about $1.1 billion from the same quarter last year to $963 million.


  • Etsy managed to beat Wall Street's guidance in the most recent quarter and set the stage for a favourable close to the year.


  • Etsy also added 6 million new buyers to its platform in the quarter. Etsy ended Q3 with 94.1 million active buyers and 7.4 million active sellers.


  • The company closed the third quarter of this year with 100% more buyers and 223% more habitual buyers on its platform than in the same quarter in 2019.


  • It's worth noting that GMS surged 134% in the third quarter of 2022 when compared to the same quarter in 2019.


  • Etsy closed the three-month period with a cash balance of $1.1 billion, despite challenges that would have reduced this.


  • Wall Street analysts still estimate that the stock has a potential upside of around 88% in the next year.


  • Some say it will be worth $9.09 trillion by 2027, registering a 14.7% compound annual growth rate (CAGR) through then.


  • The company has expanded its share of a broad total addressable market that it estimates to be worth as much as $2 trillion when including all its product segments. Estimates show the handicrafts market alone will reach a global valuation of $1.2 trillion by the year 2027.


Negative Hype

No investment is free from negatives, and Etsy isn’t an exception. It is important to consider the downsides of an investment before making it, here are some of them.


  • Consolidated gross merchandise sales (GMS) declined about 3% compared to a year ago.


  • Etsy also reported a non-cash impairment charge of $1 billion to write down its 2021 acquisitions.


  • It booked a net loss of $963 million due to write-downs on the values of Depop, a second-hand fashion reseller, and Elo7, known as the Etsy of Brazil, both of which it acquired in 2021.

Conclusion

Even with ongoing macro headwinds, the strong U.S. dollar, and changes in consumer spending in the current environment, Etsy continues to realize strong growth from pre-pandemic levels as its business normalizes compared to the pandemic era. With shares down 55% in 2022, Etsy now trades at a price-to-earnings (P/E) ratio of 36. However, when you consider the company's rapid historical growth and strong outlook over the coming years, coupled with its impressive profitability, it might be a good decision to pay up for Etsy stock right now.


HypeIndex is an AI platform that detects Hype in stocks and cryptos before it moves the market, providing reliable early detection for profitable investment opportunities.

The algorithm for our proprietary HypeIndex score is based on sentiment analysis, data science and machine learning.




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