Things seemed bleak for Etsy (ETSY -1.34%) investors two months ago when shares of the online marketplace operator briefly dipped below $30 for the first time in nearly two years. An encouraging financial update last month and a blowout earnings report last week have turned things around in a hurry. The stock has now catapulted above $80, hitting an all-time high on Tuesday.

The news got even better on Wednesday when Citi analyst Nicholas Jones boosted his price target on the stock to a Street-high of $100. Jones feels that the coronavirus crisis is accelerating the consumer transition for Etsy's fragmented arts and crafts and vintage categories from brick-and-mortar options to online outlets. His price goal for the stock was previously $60. 

Etsy-branded pen and notebook on top of a wood table.

Image source: Etsy.

Getting crafty

Etsy's first quarter was reasonably solid, even if the seemingly heady top-line gains were boosted by the Reverb acquisition. Gross merchandise sales (GMS) rose 32%, but if you back out Reverb's contribution (the deal closed in August of last year, so the business didn't factor into the prior year's first quarter) GMS rose at a more pedestrian 16% pace. The 35% year-over-year pop in revenue was also naturally inflated by the online store for musical gear that will continue to pad the top line until we get to the second half of next August. 

Reverb is a smart deal, but it's creating some odd looks for Etsy as a whole. Marketplace revenue that has clocked in between 73% and 74% of the revenue mix in each of the four previous years slipped to 68% in the first quarter. Domestic revenue actually grew faster than its international results. The number of active sellers grew faster than the count of active buyers when it has historically been the other way around. 

We knew the first quarter would be different. Etsy provided an update in early April detailing how strong momentum -- GMS rose 41% through January and February -- came to a screeching halt in March. GMS actually turned slightly negative at one point, declining 2% for the third week of March when most of the country was starting to shut down. 

It didn't take long for Etsy to bounce back. Its crafty sellers were tasked with helping create COVID-19 masks, and they delivered. Etsy's marketplace sold $133 million in face masks in April alone.  Etsy now expects to top $2 billion in GMS for the current quarter, eyeing 80% to 100% year-over-year growth for the second quarter. It sees revenue soaring between 70% and 90%. Reverb's contribution will be padding results -- it's all incremental at this point, and good luck scoring musical instruments locally to help you pass the time -- but it won't account for half of the growth in GMS as we saw in the first quarter. 

Etsy stock isn't cheap at this point, and the new analyst price goal of $100 is more than triple where it was when the online marketplace bottomed out in March. The shares are trading at a steep 11 times trailing revenue, and it's barely profitable, so the earnings multiple is even more outrageous. However, with momentum clearly back this quarter and Etsy now earning the right to be among the handful of stocks executing more effectively in the new normal of COVID-19, it's probably just a matter of time before the stock meets triple digits.