Analysts are forecasting annual growth of more than 20% for the next five years for this internet retailer.
Etsy, Inc. (ETSY)
From Canaccord Genuity Research
Following the market close, Etsy provided an update on how COVID-19 has impacted its business. While Ql GMS grew ~32% y/y, broadly in line with our and consensus estimates pre-COVID, Etsy is withdrawing its FY20 guidance and will likely provide a FY outlook during its Q1 earnings call in May. Management also offered a range of GMS growth and profitability scenarios and reaffirmed its focus to deliver positive adj. EBITDA and CF for the year.
Consolidated GMS grew 41% y/y for January and February, before the COVID-19 pandemic started impacting the business in early March, with GMS declining 2% y/y in the third week of March. In the fourth week of March, Etsy saw demand recover; with GMS growth of 27% y/y, although demand remained volatile, with day-to-day changes ranging from -4% y/y to +23% y/y growth. In aggregate, Etsy’s consolidated GMS grew 32% y/y during Q1 to ~ $l.4B. Within the company’s marketplace, categories that would typically be strong in March, such as weddings and jewelry, have faced headwinds while categories that have benefited include self-care, puzzles and games, and bath & beauty. The company’s music marketplace Reverb is also seeing some benefit as many other stores in that industry are closed.
Etsy recently announced it will be spending $5M on Offsite Ads to promote products on behalf of sellers, who will not pay any fees on ads until at least May 1. The company is also giving sellers a one-month grace period to pay their bills and is offering 24/7 member support to address any questions on delivery times and shipping issues. Additionally, Etsy advocated to Congress to make sure its self-employed sellers were included in the relief bill and has provided a guide to sellers on how to navigate through the stimulus package and identify which benefits they are eligible for.
We are leaving our estimates and PT unchanged, with an intention to update both once we have more visibility. Our $72 PT is based on ~7.2x forward (2021E) revenue estimate and is supported by our DCF valuation.
Maria Ripps, CFA, Michael Graham, CFA, and Jason Tilchen, CFA, Max Masucci, Canaccord Genuity Research, www.canaccordgenuity.com, April 3, 2020