What happened

Etsy (NASDAQ:ETSY) followed up its 25% gain in May with a 31.2% rise in June, according to data provided by S&P Global Market Intelligence. The company has emerged as one of the retail winners during the COVID-19 pandemic, and Wall Street is convinced first-time shoppers are likely to make visits to Etsy a part of their regular routine.

So what

It's too simple to say all of Etsy's recent success comes down to a single product, but without doubt face masks are a big part of the reason investors have warmed to the company of late. Etsy is an online marketplace for buying and selling handmade and vintage goods. It's been popular with some, but to date it hasn't been central to the broader e-commerce conversation in a way that Amazon.com is.

An online merchant prepares a shipment.

Image source: Getty Images.

But with the pandemic raging and face masks becoming the standard for anyone wishing to venture outside of their house, custom masks have become a must-have fashion accessory and Etsy's marketplace has emerged as a go-to for consumers.

Etsy shot higher in June as Wall Street analysts took notice and began to believe the Etsy surge was not a one-time event. The stock received at least a half dozen upgrades or price target increases from analysts during the month, with Loop Capital's Laura Champine, for example, saying that Etsy has growing momentum thanks to the masks, which should help it to capture a larger portion of overall e-commerce sales.

The investment case, put simply, is that masks have introduced Etsy to a large number of customers who hadn't previously used the site.

Now what

Etsy shares have come a long way in a short amount of time, tripling in value since March. Runs like that can't be sustained forever, and investors shouldn't be surprised if there is a near-term slowing or even a pullback as some holders book their gains.

But for a long-term holder, there's still a lot to like about the company. Investment bank Nomura last fall said Etsy holds only about a 4% share of an estimated $140 billion addressable market. Etsy's exposure and name recognition have grown considerably since then, and assuming those who came for the masks liked what they found, the company is well on its way to becoming the dominate market for homemade goods.

Whatever happens to the shares in the months to come, I believe Etsy can continue to climb over time.