Etsy, Inc.

ETSY Details

Etsy, Inc. (NASDAQ: ETSY) operates a two-sided online marketplace connecting buyers and sellers globally. Its online marketplaces are Etsy.com and Reverb.com. Its revenues are categorized into 1) Marketplace revenue, which refers to fees levied on sellers for listing their products on its platform, and 2) Service revenue, including revenue earned through optional services (on-site advertisement and shipping labels).

Latest News:

• Key Appointments: On March 22, 2022, Raina Moskowitz, who has been with Etsy since 2018, will take on an expanded role as Chief Operating Officer, effective immediately. In addition, the firm is bolstering its executive team with the appointment of Kim Seymour as Chief Human Resources Officer, which will take effect on or around April 26, 2022. Raina and Kim work at Etsy's headquarters in Brooklyn, New York, and report to CEO Josh Silverman.

FY21 Results:

• Growth in Topline: The company reported YoY growth of 34.97% in total revenue to USD 2.33 billion in FY21 (ended December 31, 2021) from USD 1.73 billion in FY20, attributable to 33.97% growth in Marketplace revenue.
• Improvement in Profitability: ETSY’s reported an increase in net income to USD 493.51 million during FY21 vs. USD 349.25 million in FY20.
• Cash and Debt Position: As of December 31, 2021, the company had cash & cash equivalents (including short-term investments) of USD 11.52 billion and total debt of USD 19.56 billion.

Key Risk:

• Competition Risk: ETSY operates in the e-commerce industry and faces direct competition from established players like Amazon, eBay, and Alibaba, which could undermine the company's business interests.
• Dependence on Third-Parties: Google Cloud accounts for most of the data processing, networking, and other service requirements of Etsy.com. Therefore, any disruption in the services of google cloud could adversely impact its operations.

Outlook:

Q1FY22 Guidance (Source : Earnings Presentation, FY21, February 28, 2022)

Valuation Methodology: Price/Earnings Per Share Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

ETSY's stock price has fallen 56.86% in the past six months and is currently leaning towards the lower end of its 52-week range of USD 104.71 to USD 307.75. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 124.17.

Considering the correction in the stock price, improvement in fundamentals, positive outlook, associated risks, and current valuation. We recommend a "Buy" rating on the stock at the closing price of USD 101.79, down 5.23% as of April 21, 2022.

Three-Year Technical Price Chart (April 21, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.