Down 75% from November high is Etsy could be an attractive buy
The market turned off Etsy $ETSY in 2022 thanks in large part to slowing growth and the broader market downturn. Its revenue growth tumbled from 111% in 2020, to 35% in 2021. If that's not bad enough, analysts expect a meager 9% in 2022.
However, Etsy has built a tremendous platform, and importantly is positive cash flow. So any downturn in the broader economy will not force Etsy to tap the markets for liquidity.
There's really nothing like Etsy on the market today and this I think makes them a compelling investment prospect. Connecting buyers and sellers with unique and creative goods, Etsy has expanded over the past few years through some intriguing acquisitions.
Reverb in 2019, which is a musical instrument marketplace
Depop in 2021, which is a secondhand fashion marketplace based in the UK
Elo7 in 2021, which is a Brazilian artisan marketplace
As mentioned, Etsy isn't one of those growth companies that are burning through cash like there's no tomorrow. They have been very diligent with their spending which sees them add roughly $500m cash to their war chest each year. This is important because looking through many tech companies in the sub $10b market cap space, there is a large number who are not cash flow positive or are very closed to the line, and trying to raise capital when the stock is down 70%-80% is devastating for existing shareholders. Secondly, this put Esty in a strong position to look for further acquisitions to further build out its moat as the largest platform for creative goods and gifts on the planet.
Currently, priced at a value of 4.48 EV / Revenue, I believe this makes them quite an attractive proposition to if not buy, then at least place on the watchlist to see if the price continues to track down.