In the first three weeks of March, Etsy lost half its value due to concerns that the economic downturn caused by coronavirus would undermine consumer sales. Then people began to turn to the site to buy masks, and Etsy took off.
Since the fall of March 20, Etsy’s stock price has more than tripled. Shares jumped 5.1% on Tuesday to a record $ 101.22 after RBC Capital Markets raised its target price to $ 117 from $ 79 and Goldman Sachs raised its target to $ 120 from $ 88.
RBC wrote in its report that it conducted a survey of buyers, and 82% of respondents said they expect to spend more on Etsy over the next 12 months. Goldman said its optimism reflects application downloads after an increase of more than 100% in June from a year earlier. The two reports appeared the day after Jefferies analysts said they were seeing “continued growth” for Etsy based on e-commerce trends and the site’s ability to sell a wide range of products to new and existing customers.
“In addition to being the main beneficiary of investing in homes, the surge in mask sales on ETSY since April has helped to present broader offers to new customers,” write Jefferies analysts who recommend buying stocks and have a target price of $ 110. “We are also seeing a rebound in categories related to social events, as the states relax restrictions on meetings, helping offset the impact of declining masks sales.”
Etsy touts itself as a global market for independent sellers, with a focus on “unique and creative goods” and collectibles along with daily necessities. A company that debuted in the stock market in 2015 makes money by charging a listing fee for goods and a commission when sales are completed. Like other e-commerce companies, Etsy is faced with constant pressure from Amazon’s vast market, competitive prices and fast delivery options.
In the first few weeks of shelter orders, Etsy’s volume fell and investors fled. But the fate of the company turned around in April, when sellers began to create face masks and sell them in large volumes.
In its first-quarter earnings report, Etsy reported that more than 12 million masks (worth $ 133 million) were sold in April, making it the second largest category if it were a separate division. CEO Josh Silverman called it an “unusual month” and said the company recruited salespeople after the Centers for Disease Control and Prevention recommended that Americans wear fabric masks.
The day before the CDC announced its recommendation, Etsy withdrew 2020 financial leadership, citing an unstable economy. Earlier this month, Silverman spoke at an event for investors about the growth in sales of masks and how they helped change the company’s trajectory.
“Our salesmen were able to suddenly start creating masks from the air in a matter of days and reach the point where they could produce and sell hundreds of thousands of masks per day for several weeks,” said Silverman. “And I don’t know many other retailers who could do something like this – for example, the agility of our market.”
Like many other companies that see spikes in use when consumers and workers are stuck at home, Etsy still cannot predict what will happen when the economy reopens and people return to the office.
But RBC is rather optimistic about stable trends, since it increased its revenue estimate for 2021 by 9.5%, and now expects sales to reach 1.4 billion dollars next year, which will be 22% higher than the forecast for 2020, most of the purchasing activity they conducted is sustainable.
According to RBC, of the 4 million new Etsy customers in April, 25% bought masks, while the rest bought goods in other categories, adding that the company proves its value for a number of products and increases the effectiveness of advertising and attracts customers to the site.
“We see Etsy as one of the few structural winners in this crisis, and the company is gaining a share in the fast-growing and accelerating e-commerce market,” RBC writes. “We believe that a strong secular tailwind (closing stores, SIP, customer safety issues) and Etsy’s increased marketing efforts should enable the company to gain new customers faster than in the past, at least in the short term.”
LOOK: Analyst what stocks benefit from home trading