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Etsy: From Niche To Mass Market, The Best Transformation Story Of 2020, An Extensive Review

Mar. 01, 2021 2:20 PM ETEtsy, Inc. (ETSY)MELI, SE41 Comments
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DTF Capital


  • Etsy is one of the best business transformation stories in 2020.
  • It kick-started with an unprecedented surge in sales for essentials and fashionable mask sales in March 2020.
  • Today, Etsy is the go-to place for unique home furnishing and artisan products in other categories. Mask sales account for only 4% of total GMS.
  • We go through how Etsy transformed itself so impressively.
  • Etsy is well-positioned to overdeliver in 2021 again, despite headwinds from the economy reopening.

Investment Thesis

We have been wrong before on Etsy (NASDAQ:ETSY) but were so impressed by how the company handled the pandemic that we became a bull from Q2’2020. At the Q4 and fiscal year 2020 results conference, the CEO, Josh Silverman, reminded us why we had made the right decision.

[…] 2020 was, no doubt, a transformative year for Etsy, a time when circumstance met preparedness, highlighting the agility of our model, the dynamism of our team and the power of our differentiated strategy. Etsy emerges transformed a larger and stronger marketplace as a result.

Indeed, Etsy emerged stronger from Covid-19, revenue multiplied by 2.2x and net income by almost 5x compared to FY2019. Improvements in buyer acquisition, purchase, and after purchase experience had led first-time buyers and lapsed buyers returned to active buyers.

Thanks to Etsy’s distinctive offerings, excellent purchase experience, network effects of its platform, capital-light and agile business model, Etsy is well-positioned to expand to other product categories and geography. The total addressable market (‘TAM’) would grow drastically from $100B to $250B, allowing Etsy to sustain its strong growth for many years to come.

An investment in Etsy today isn't just about hopes and dreams. At 16x EV/Sales, 12x NTM EV/Sales, and 40x EV/EBITDA, it’s also about a very reasonable valuation.

Impressive growth and no longer a niche handcraft eCommerce site

Etsy reported yet another spectacular set of financial results.

Etsy FY2020 results

Total buyers summed up to 150M by the fiscal end of 2020, of which more than half were active. These are 81M buyers who bought once during the previous 12 months, up 77% YoY. Under this cohort, 32.3M bought more than one purchase. Etsy called these repeated buyers, up 97% YoY.

More impressively, the most crucial cohort, ‘ habitual buyers,’ who purchased more than six times a

This article was written by

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I run Sleep Well Investments to find time-tested and anti-fragile businesses to help you avoid permanent capital losses - the first rule of investing. All businesses go through a comprehensive review, I call it a ‘sleep well investment’ checklist, to evaluate their (i) business quality, (ii) competitive position and risks, and (iii) valuation. They are given a score and a trigger (buy) price to ensure a high margin of safety.The first few write-ups are: The VAT Group - The Vaccum Valve Monopoly Shimano - The Bike Component Monopoly Floor and Decor - Future Home Improvement Monopoly Subscribe for more sleep-well investments.

Analyst’s Disclosure: I am/we are long ETSY, SE, MELI. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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