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Etsy Remains One Of My Top Conviction Ideas For 2021

Mar. 08, 2021 12:01 PM ETEtsy, Inc. (ETSY)25 Comments

Summary

  • ETSY returned 300% in 2020, but I see more upside ahead.
  • The company has become the 4th largest e-commerce site in the country.
  • Shares trade at a reasonable valuation and the company maintains a net cash balance sheet.
  • ETSY is one of my top conviction ideas with 50% potential upside over the next year.
  • Looking for a portfolio of ideas like this one? Members of Best Of Breed get exclusive access to our model portfolio. Learn More »

Etsy (NASDAQ:ETSY) was the second top performing stock in the S&P 500 in 2020, returning over 300%. The pandemic has expanded its market from custom T-shirts to anything and everything that can be unique (which is almost anything and everything). ETSY may be able to capitalize on its surge in name brand recognition to become an e-commerce powerhouse in a rapidly growing market. The company maintains a conservatively managed balance sheet with plenty of excess cash. Shares trade at only 15x sales, giving the stock potential upside from both underlying growth and multiple expansion. ETSY is one of my top conviction ideas for 2021 and beyond.

The New E-commerce Giant

When I first highlighted ETSY for subscribers as a top conviction idea in November 2019, the stock traded hands at around $45 per share. With the stock now trading around $200 per share, I have yet again made ETSY a high conviction holding. There’s been a dramatic transformation at play.

ETSY is an e-commerce marketplace which connects buyers to sellers of unique, handcrafted, and differentiated goods.

(Investor Presentation)

Prior to 2020, ETSY was arguably operating in a niche market. Perhaps one might go to ETSY only to purchase a custom T-shirt or custom cup. But such use cases represent only a small sliver of the potential opportunity. The pandemic has accelerated - to dramatic degree - the true potential of the “unique” market. ETSY has become the 4th largest e-commerce site based on monthly visits in the U.S., as its use cases have essentially spread to everything and anything that can be unique:

(Investor Presentation)

This is by no coincidence. ETSY saw its business boom during the pandemic but instead of simply minting profits, it invested heavily in advertising spend to rapidly grow awareness.

(Investor Presentation)

Coming back to that “pandemic

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ETSY is one of my favorite stock ideas, and it is only one of 16 picks in my High Conviction List.

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This article was written by

Julian Lin profile picture
28.45K Followers
High conviction investment ideas in the winners of tomorrow.

Julian Lin is a top ranked financial analyst. Julian Lin runs Best Of Breed Growth Stocks, a research service uncovering high conviction ideas in the winners of tomorrow. 

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Analyst’s Disclosure: I am/we are long ETSY, AMZN, GOOGL. 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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