Shares of Etsy (ETSY 7.99%) gained 11.9% in value last month, according to data provided by S&P Global Market Intelligence. In January, Adobe Analytics released holiday sales data, showing that e-commerce generated two years' worth of growth.
The holiday shopping season drove online sales up 32% over 2019, which is obviously good news for Etsy, which benefited tremendously from the accelerated shift to online shopping during the pandemic.
Etsy hasn't released fourth-quarter earnings yet, but if Adobe's report is any indication, the online marketplace should have experienced a strong finish to the year.
The stock is up 328% over the last 12 months. Through the third quarter, half of all buyers on Etsy purchased at least one item in the past year. That engagement translated to triple-digit growth in revenue and net profits through the first nine months of 2020.
Etsy has benefited with its unique focus on small business and helping buyers find one-of-a-kind items. It's also benefiting from an incredibly dynamic base of 3.7 million active sellers who can quickly shift their inventory to products that are relevant now. For example, Etsy got a marginal boost to its gross merchandise sales from face masks and strong sales of "vote" necklaces during election season.
Given Adobe's report, it's almost a foregone conclusion that Etsy will report a strong fourth quarter, especially since Etsy is an ideal place to look for unique gifts for the holidays. Analysts expect revenue growth to come in at 88% year over year, with earnings per share more than doubling to $0.58 for the fourth quarter.
However, investors will be more interested in what management has to say about the year ahead, since the lofty share price reflects high expectations for growth. Etsy stock looks expensive, trading at a trailing P/E of 108. Whether the shares can justify that valuation will depend on how much growth Etsy can sustain beyond the pandemic-driven momentum.