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Etsy: Distinctive Niche Focus Could Pay Off

Mar. 05, 2020 4:57 PM ETEtsy, Inc. (ETSY)2 Comments


  • Etsy sees continued solid growth and more importantly sees operating margins stabilize in 2020.
  • This is comforting for investors after two quarters of quite severe margin pressure.
  • The long term still looks promising amidst a somewhat distinctive e-commerce business model, yet real margin work and continued growth are to be done to deliver on appeal.
  • Looking for more stock ideas like this one? Get them exclusively at Value In Corporate Events. Get started today »

In a week in which global equity markets have seen significant turmoil, and that is quite an understatement, there was a rare winner in the form of Etsy (NASDAQ:ETSY) which managed to gain in a week in which many competitors would be happy to see share price losses limited to single digits.

The reason for that outperformance should be seen in light of the fourth quarter results and the outlook provided for 2020, as investors like the risk-reward here for the company and its shares.

The Company, The Thesis

Etsy might be a compelling business as it claims to be a global marketplace, yet unlike most of its peers, it focuses on unique and creative goods. Despite trying to be unique the company is very large in its scale with more than 2 million sellers and 40 million buyers being active on the platform. Nonetheless, the treasure hunt and unique products make that user scores and satisfaction remains high. The mission of the company is telling a lot with regards to the goal of the company and that is to "keep commerce human".

In past takes on the business, I noted that this business is what might distinguish the company from other platforms and might really be a key distinctive feature with regards to protests arising against large internet giants, anti-trust issues and activism from consumer groups being on the increase.

I looked at the shares in this article dating back from July of last year when the company acquired Reverb in a $275 million cash deal. In that article I noted that the company enjoyed great operating momentum in recent years. The company generated $441 million in sales in 2017 on which it reported operating earnings of $12 million. Revenues rose 37% to $604 million in 2018, but note that fourth quarter sales growth accelerated to 47% confirming that

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This article was written by

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Finding value that gets unlocked in M&A, IPOs and other corporate events
The writer is a long term value investor and M.Sc graduate in Financial Markets with over 10 years experience. Value can be found in both long and short ideas and uses options to enhance the risk-return profile of investment ideas. Disclaimer: This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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