3 Tech Stocks To Buy While They Are On Sale (ETSY)

Etsy is becoming more fashionable

Brian Withers (ETSY): Etsy seemed to be an overnight success as millions discovered the platform last year when searching online to buy coronavirus face masks. Since then its artisans have sold $948 million worth of masks. But those investors who think this tech-powered marketplace is just a coronavirus play couldn’t be more wrong. Let’s dive into the company’s latest results and see why this gem could be a steal at 20% below its all-time high.

Source: Company earnings presentation. An active buyer is one that has made a purchase in the last 12 months.

Gross merchandise sales on its platform declined from the holiday quarter coming into Q1 bringing revenue down 11% quarter-over-quarter. But the year-over-year changes were robust, with a 127% increase in GMS, 142% increase in the top line, and 90% increase in active buyers. 

Sequentially, buyer metrics were strong across the board, showing that this platform is attracting and keeping customers, even as the coronavirus wanes. Repeat buyers grew 13% sequentially to 36.4 million and habitual buyers grew 22% to a record 7.9 million. Repeat buyers have more than one purchase day in the last twelve months, and habitual buyers rack up six purchase days of that same time period. What’s even more impressive is that GMS per active buyer also hit a record of $124 in the quarter, a 20% year-over-year improvement. 

But the company is not resting on its laurels. A recent acquisition of fashion reseller Depop for $1.6 billion, bolsters its apparel category which put up $1.2 billion in GMS over the previous twelve months and a solid 83% year-over-year growth for the quarter. The Depop brand strengthens the company’s stranglehold on “special” e-commerce, where 88% of buyers said they find products on Etsy that they can’t find anywhere else. But wait, there’s more. Last month, it extended its M&A run with a $217 million purchase of Elo7, the Etsy of Brazil. Between these two acquisitions, the company will have its hands full with integration activities and pursuing more growth in the quarters to come.

With the stock off its high, don’t be fooled into thinking this pullback makes the stock a bargain. It still carries a lofty valuation that might scare off value investors. Its price-to-sales ratio is in the double-digits at 13 and its trailing price-to-earnings ratio tops 50. But growth investors know that they need to pay up for quality and this marketplace for artisans is a one-of-a-kind. Investors with a long term mindset would do well to pick up shares at this price, like I did this past week. Maybe you should consider getting in on this unique online marketplace too?