3 Reasons We’re Not Sleeping on ETSY

Jan 15, 2022

I have a confession to make: I love Reba.

As in Reba McEntire. Big hair. Bigger voice.

At some point in the last year, I must have uttered the phrase (out loud), “You know, I really just want a big t-shirt with Reba’s face on it,” close enough for my mother to hear me.

Because sure enough, on Christmas Eve, the best t-shirt I’ve ever laid eyes on was sitting under the tree for me, wrapped in a big red bow. Fancy (see what I did there?).

How did my mother find the only thing I truly wanted, but hadn’t been able to find for myself?

Etsy, of course.

Etsy specializes in unique items just like this, and has recently beefed up its search features. Lucky me.

But when it comes to investing, it doesn’t matter what companies I personally like.

What are consumers collectively reporting?

According to LikeFolio’s real-time consumer insights, many consumers who started shopping at Etsy during the pandemic have stuck around.

This is valuable insight to have. It’s just the kind of insight that we use at LikeFolio every day to identify opportunities.

In fact, Etsy has been one of our favorite companies to track in the last few years at LikeFolio.

Just take a look at our win rate, as featured in our November MegaTrends report …

Now, Wall Street is cautious of Etsy’s continued growth. Shares are trading about 40% below November highs.

But is this move justified?

LikeFolio data shows YoY overall consumer demand tempering.

Etsy Purchase Intent Mentions have decreased -34% YoY.

However, some tempering is expected alongside reopening behavior changes, considering the major pull-forward effect that has played out over the past year.

Most importantly, LikeFolio data shows three positive signs for the digital retailer moving forward:

  1. ETSY is outperforming peers in near-term demand momentum and Consumer Happiness levels.

QoQ demand growth displays comparative resilience, and Happiness levels remain on top.

  1. Etsy-specific app usage mentions (including app downloads) recorded a significant spike over the holiday season, much higher than pre-COVID levels. This is an indicator of stickiness.

Etsy proved this on its last report, when it posted results that beat analyst expectations on the top and bottom line, in spite of post-pandemic-era mask comps looming.

  1. The personalized products and unique nature of shops make Etsy the ideal place for gift giving.

The chart above shows Etsy’s “Personalization & Gift Giving” Mentions are +59% higher than pre-COVID numbers — with a noted peak during the holiday season.

Even though Etsy doesn’t report earnings for a while, if it were reporting this week, LikeFolio’s earnings signal would be Bullish (+33).

We still like this name long-term, especially as its share price falls and demand rises.

And we’ve got our eyes out for our next big ETSY play. Will it be bigger than Reba’s hair?

We’ll see.

When we spot it, members will be the first to know.

Megan Brantley

Head of Research, LikeFolio