With the Nasdaq Composite in record territory and a strong bull market, investors are likely looking for inexpensive companies to buy. Etsy (NASDAQ: ETSY) is a lucky opportunity. On March 22, the e-commerce stock was 77% below its November 2021 high. Overall, the company is doing well, and its main KPIs are significantly better than before the pandemic. For long-term investors, Etsy is a great company to buy now.
A unique position Etsy has succeeded in the highly competitive retail sector by providing unique and vintage things that most consumers agree are hard to find elsewhere. The company delivers valuable and differentiated products, setting it apart from mass-market merchants.
Etsy's company has slowed since 2020 and 2021's demand rise. In 2023, gross product sales were $13.2 billion, down 2.5% from two years earlier. However, last year's result was far greater than 2019. Etsy has grown. Although softer economic conditions put pressure on discretionary purchases, the business is well-positioned to thrive once spending picks up again.
Economic moat Investors should seek out enterprises with economic moats for long-term ownership. These traits help some companies beat the competition.
This suits Etsy. Being a massive marketplace with millions of customers and sellers gives the firm strong worldwide network effects. Because so many shoppers visit the site, retailers who wish to reach large audiences are urged to join. This increases product selection and buyer numbers. A positive cycle that grows stronger and more valued.
Etsy doesn't own inventories or warehouses, thus the network effect exists. It only provides the technology to link buyers and merchants. Without miraculously attracting shoppers and sellers from the start, a new entry would struggle to compete with Etsy's scale and global exposure.
To generate cash Etsy has better financial prospects than other growth-focused internet-enabled companies. Businesses consistently generate positive earnings and free cash flow. Today, margins are substantially higher than 10 years ago. Etsy should enhance profitability by properly managing marketing and product development spending.
The management team buys stock with extra funds. In the past year, $577 million was spent to reduce share count. This is sensible capital utilization, especially today.
Because the stock is dirt cheap. It has a forward P/E around 14.5. That kind of bargain is rare, especially for a business with a clear value proposition, strong network effects, and net income. An attractive buying opportunity for investors. However, patience and a long-term outlook are optimal for stock performance.
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