Etsy, Inc.

ETSY Details

Etsy, Inc. (NASDAQ: ETSY) runs the 'House of Brands', a two-sided online marketplace that connects customers and sellers from all over the world. Etsy.com, the company's core marketplace, is a global destination for one-of-a-kind and creative items. It had 7.5 million active sellers and 96.0 million active buyers globally as of September 30, 2021. Transaction, listing, payment processing fees, and on-site advertising and shipping label services are the primary sources of revenue for the firm. As of November 04, 2021, ETSY's market capitalization stood at USD 34.34 billion.

Latest News:

• Leasing of Corporate Headquarters: ETSY signed a First Amendment to Lease in October 2021 for its corporate offices in Brooklyn, New York. The amendment extends the current lease's term from July 31, 2026, to July 31, 2039, with an incremental future minimum payment obligation of approximately USD 163 million, of which USD 38 million is for operating lease commitments and USD 125 million is for finance lease commitments.

9MFY21 Results:

• Surge in Topline: ETSY reported a sharp uptick of 45.45% in its revenues to USD 1.61 billion during 9MFY21 (ended September 30, 2021) compared to USD 1.11 billion during 9MFY20, due to an increase in the volume of Gross Merchandise Sales (GMS) and on-site advertising revenue.
• Boost in Bottomline: It recorded a net income of USD 331.95 million during 9MFY21 vs. USD 200.71 million during 9MFY20.
• Leveraged Balance Sheet: As of September 30, 2021, the company had cash and cash equivalents (including short-term investments) of USD 816.83 million and total debt (including finance lease obligations) of USD 2.32 billion.
• Surge in GMS: ETSY reported a 39.16% increase in GMS to USD 9.29 billion during 9MFY21 compared to USD 6.68 billion during 9MFY20.

Key Risks:

• Dependence on Google Cloud: ETSY has migrated its primary production environment and data centers to Google Cloud, increasing its reliance on cloud infrastructure. Therefore, any shift of Google Cloud's cloud services to another cloud provider would be difficult to perform and cost the company substantial time and money.

Outlook:

• Q4FY21 GMS Estimates: ETSY reported on November 03, 2021, that it anticipates its Q4FY21 GMS to be in the range of USD 3.9 – 4.1 billion, indicating a 12% YoY growth.
• Revenue Guidance: It also expects its revenue for the period to range between USD 660 – 690 million, representing a 10% YoY increase, with an adjusted EBITDA margin of roughly 26%.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

 (Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ETSY Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

ETSY's stock price has surged 88.85% in the past twelve months and is currently close to the higher-band of its 52-week range of USD 113.49 to USD 283.40. The stock is currently trading above its 50 and 100 DMA levels, and its RSI Index is at 71.80, indicating an overbought zone. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 230.46.

Considering the significant uptick in the stock price and other technical indicators, we believe the decent business fundamentals are adequately reflected at the current trading levels. Hence, we recommend a "Sell" rating on the stock at the closing price of USD 271.27, up 13.21% as of November 04, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and industry information have been taken from REFINITIV.  

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