Etsy: Still Poised for Long-Term Growth

For some companies that boomed during the pandemic, there are gonna be tough comps ahead. This was evident from Etsy’s (ETSY) outlook, following the company’s latest quarterly statement.

While the homemade flavored e-commerce platform delivered another strong display in Q1, investors didn’t like Etsy’s warning of a deceleration in growth for the upcoming quarter.

With sales of masks and other Covid-related paraphernalia, Etsy has been a prime beneficiary of consumers’ pivot to online shopping during the pandemic. The boom was sustained in Q1.

Revenue increased by 141.4% year-over-year to $550.6 million, coming in ahead of the Street’s forecast by $20.19 million. Consensus called for EPS of $0.88 – Etsy reported earnings of $1 a share. And while analysts expected gross merchandise sales of $3.04 billion, sales rose by 132% to reach $3.14 billion.

However, looking ahead to Q2, Etsy anticipates gross merchandise sales in the $2.8 billion to $3.1 billion range and revenue to come in between $493 million to $536 million, a 15% to 25% uptick from the same period last year – comparatively tame when put up against the triple-digit growth in the prior four quarters. Citing pandemic related uncertainty, the company refrained from providing guidance for the full year.

Nevertheless, Oppenheimer’s Jason Helfstein thinks the new buyers Etsy accumulated in the pandemic era will come back for more and the 5-star analyst sees the company having a “long runway of growth ahead.”

“Adjusting for mask sales, comps & stimulus checks, GMV growth did not slow from 4Q, with 2Q guidance assuming at most 400 bps slowdown on apples-to-apples basis,” Helfstein noted. “This highlights ETSY’s strong marketplace fundamentals, as repeat buyers +114% y/y. While investors were disappointed with guidance, we view the 84M buyer base as having the ability to scale to materially higher levels. We also see seller services as a natural hedge to re-opening headwinds.”

Helfstein remains an Etsy bull and following the report keeps an Outperform (i.e., Buy) rating on the shares. That said, there’s a trim to the price target, which is reduced from $240 to $200, suggesting upside of 25% from current levels. (To watch Helfstein’s track record, click here)

Most on the Street remain in Etsy’s corner. The stock’s Moderate Buy consensus rating is based on 10 Buys vs. 2 Holds and 1 Sell. The average price target is more upbeat than Helfstein’s, and at $230.93, could yield returns of 45% over the next 12 months. (See Etsy stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.