Etsy (NASDAQ:ETSY) was one of the biggest pandemic success stories.
The temporary shutdown of retail stores and lockdown orders forcing people to isolate at home meant explosive growth in online shopping last year. Etsy saw huge sales increases and made headlines for the massive volume of cloth face masks sold on the platform.
And ETSY stock was among the top performers of 2020, gaining 310% for the year. Despite some weakness in March, ETSY has done well in 2021 also, up nearly 26% so far this year.
There’s still time to buy ETSY stock on the dip, taking advantage of that stumble in March. ETSY is a Portfolio Grader “A-rated” stock, and it makes a great addition to any diversified portfolio.
You might have some trepidation over the fact that Etsy is an e-commerce play, given vaccinations are underway and retail stores are reopening. But I wouldn’t worry about that. Here’s why I think ETSY stock still has plenty of upside ahead.
Will Online Retail Adoption Fade With Vaccination?
E-commerce companies like Etsy have received a tremendous boost from the pandemic.
Scott Galloway is a marketing professor at New York University’s Stern School of Business. While the pandemic was raging in 2020, Professor Galloway had this to say about the accelerated adoption of e-commerce:
“The percentage of retail done on digital channels has gone up one percent each year. And as of 2020 it was at 18%, and then in eight weeks it went to 28%! We had a decade in eight weeks.”
When Etsy reported its full-year 2020 results, the effect the pandemic had on its business was obvious and dramatic. The value of merchandise sold on the platform was up 106.7% compared to 2019. Revenue increased by 110.9% year-over-year. The number of active buyers on the platform increased by 76.7% YoY. In the aftermath of that report, ETSY stock leapt 24% in two sessions, closing at an all-time high of $244.58 on March 1.
The question is, will the gains made by the industry continue as the Covid-19 vaccine rolls out and the pandemic wanes? Or will consumers walk back their online shopping in favor of returning to brick and mortar retailers?
That fear saw the market punish ETSY stock with a single day loss of 12.5% on March 3, after it was announced that Texas would fully re-open. A slowdown of growth is inevitable as brick-and-mortar shopping resumes. However, fears that Etsy is going to see sales crash to pre-Covid levels are unfounded.
Studies show consumers have no intention of giving up their online shopping habits: the convenience is simply too great. Once an account is created with an e-commerce site like Etsy, the biggest barrier to using the site is gone — and Etsy came out of 2020 with tens of millions more users than it had in 2019.
The Mask Question
One Etsy trend may either concern prospective investors, or give them an even more optimistic look at the company’s futures: masks. Etsy sellers moved a ton of cloth masks during the course of the pandemic. Over the second and third quarters, $600 million of the $5.3 billion in sales on Etsy were masks. That’s more than 11.3% of sales.
The concern is that when the pandemic is over, the mask sales evaporate.
I’m not particularly concerned about this scenario. First, even if you factor out the mask sales, Etsy still posted impressive gains in 2020. Forbes did the math and calculated roughly 90% year-over-year growth in sales on the platform without counting mask sales.
Second, those mask sales may well continue. Maybe not at the same level, but in East Asia, face masks have been common in crowded areas for more than a decade. U.S. medical experts believe that some Americans may follow suit and adopt face masks going forward.
Bottom Line on ETSY Stock
ETSY stock is currently down over 11% from its March 1 high. This offers a buying opportunity to pick up one of the best-performing and lower-priced e-commerce stocks on the dip.
— Louis Navellier and the InvestorPlace Research StaffRetire Early With $3 Wonder Stock? [sponsor]
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Source: Investor Place