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Etsy: Website Traffic Signals Growth, Ahead of Earnings
Stock Analysis & Ideas

Etsy: Website Traffic Signals Growth, Ahead of Earnings

Etsy (NASDAQ: ETSY) is an e-commerce service provider operating a two-sided marketplace platform with about 7.5 million active sellers and 96 million active buyers. Significantly, 40% of the platform’s gross merchandise sales (GMS) come from repeat buyers.

Needham analyst Anna Andreeva believes that ETSY stock is poised favorably for attractive returns in 2022; and thus, recently named it her top pick for the year.

Reaping the Benefits from Retention Initiatives

Andreeva is particularly encouraged by the company’s focus on increasing purchase frequency and retaining existing buyers on its platform. The analyst believes that these initiatives will drive sustained double-digit growth in GMS.

This focus led Etsy, in 3Q21, to record a 56% retention rate of the buyers who had shopped during the 2020 pandemic. This percentage was, as Andreeva pointed out, much higher than the historic average of 43%.

Importantly, Andreeva is quite upbeat about this buyer group’s contribution to sales in 2022 and 2023. However, she believes that this important area of growth is largely neglected by the Street consensus.

A Slight Glitch

Management of Etsy had earlier mentioned strong seasonal demand in October. However, Andreeva believes that sales must have slowed post the Black Friday (November 26, 2021) and Cyber Monday (November 28) surge.

Moreover, resale fashion marketplace Depop, which Etsy had acquired back in June last year, witnessed a decline in sales in 3Q21. As we await the ETSY earnings date for the fourth quarter, Andreeva expects a decline in Depop sales again.

Traffic Trends Upwards

Being an online marketplace, the amount of traffic coming into the website makes a huge difference to the top-line results. Andreeva noted in her recent research report that there is a surge in searches in Depop products in the UK in 4Q21. This is important because the UK contributes to around 40% of Depop sales, and has strong brand awareness in the region.

Moreover, we could not help but notice a website traffic uptrend on the TipRanks website traffic tool, despite Andreeva’s expectation of a sales decline in 4Q21. When we looked more closely at the analytics, we saw that in 4Q21, there was an increase in traffic to the overall etsy.com website from unique visitors, on a global basis. This gives us hope for the fourth quarter top-line results for the company as a whole.

Interestingly, Etsy is also currently among the 50 top trending websites in terms of website traffic in the e-commerce domain.

Wall Street’s Take

Andreeva reiterated a Buy rating on the stock with a price target of $325.

The consensus is, however, more cautiously optimistic about Etsy, with a Moderate Buy rating based on 10 Buys, 2 Holds, and 1 Sell. The ETSY price target is $277 on average, which is 49.61% higher than the current price levels.

Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates  Read full disclaimer >

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