The e-commerce platform provider of handmade, personalized gifts saw its shares more than triple year to date, as its rapid growth has propelled the stock to an all-time high this year.
The company reported its third-quarter earnings recently and continued to post impressive numbers. Revenue for the quarter surged by 128% year over year to $451.5 million, while net income jumped more than sixfold to $91.8 million. The pandemic accelerated the growth of online marketplaces such as Etsy, and the company has worked hard at retaining existing customers and driving increased purchases through its loyal customer base. Gross profit margin improved further from 65.3% in the third quarter of 2019 to 73.4% in the current quarter, as gross merchandise sales (GMS) soared around 120% year over year to $2.6 billion.
The good news is that the majority of Etsy's GMS is made up of existing buyers who purchased more frequently on its platform, spending one and a half times more than what they did last year. Also, more than 10%, or around 14.8 million, or the total buyers on Etsy's platform were new and reactivated buyers. This category represents shoppers who are new to the company's platform or have not made a purchase in the past 12 months. These two statistics paint a favorable picture of Etsy's business, as it shows an increase in both its customer base and the average amount spent per customer.
While it can be argued that much of this year's growth can be attributed to the onset of the pandemic, the shift to online shopping has been a major structural change that's unlikely to reverse anytime soon. As more people start buying online and realize the convenience that it offers, e-commerce will experience sustained growth over time, benefiting companies such as Etsy.
The company is not standing still, though. In September, it introduced a personalized search where different buyers receive different search results even if they used similar queries, while new discounts and offers were being pushed to increase purchase frequency from repeat customers. With the holiday season coming up, Etsy should enjoy a further boost to its already-stellar financial performance.