What happened

Etsy's (NASDAQ:ETSY) stock price quadrupled in value last year, according to data provided by S&P Global Market Intelligence. The pandemic had a seismic impact on the company's revenue growth, as consumers flocked to the marketplace to buy face masks and other goods. 

So what

Etsy was already growing pretty fast before 2020, but revenue growth accelerated to triple-digit rates beginning in the second quarter and remained high through the third quarter. 

A shop owner packing an order in a box.

Image source: Etsy.

While sales of face masks brought a marginal amount of business to Etsy's platform, it was encouraging to see the marketplace perform well across several major retail categories, including apparel, personal care, craft supplies, jewelry, and homewares. 

Overall, Etsy's gross merchandise sales across its top six categories, excluding face masks, increased by 92% year over year on a trailing-12-month basis through the third quarter. That's about twice the rate that total e-commerce grew in the second quarter, which points to significant market share gains for Etsy. 

Now what

The rush of traffic during the pandemic is providing Etsy valuable user data to improve search and discovery, making the shopping experience even better. This will set the company up for more success at satisfying the 69 million active buyers who have engaged with the marketplace over the last 12 months.

But some investors might be wondering what happens when vaccines arrive. Analysts expect the company to post modest revenue growth of just 12% in 2021, which is way down from the 97% growth rate that Etsy is expected to report for 2020. 

While Etsy is clearly building a unique brand in e-commerce, a dramatic slowdown in growth may limit gains in the stock price in the near term. Keep in mind, the stock is currently trading at a high forward price-to-earnings ratio of 71, implying high growth expectations. 

Etsy's addressable market is big enough that a near-term deceleration in revenue growth shouldn't be concerning, but it's something investors will want to watch as the year progresses.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.