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These 2 Old-School Nasdaq Stocks Flew High on Friday

By Dan Caplinger - Feb 26, 2021 at 2:10PM

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Success isn't all about electric vehicles and renewable energy.

The Nasdaq Composite (^IXIC 0.00%) got some much-needed relief on Friday, with the market benchmark finally regaining a little bit of ground after a brutal sell-off that lasted much of the week. As of 2:30 p.m. EST, the Nasdaq was still up about half a percent, although that was well below where it had been at its highs.

Many investors think of the Nasdaq as being synonymous with technology stocks, and it's definitely true that many of the companies with the most weight and influence in the Nasdaq do indeed have ties to tech. However, on Friday, it was a couple of companies specializing in traditional products like coffee and arts and crafts that delivered some of the best returns among Nasdaq stocks. Below, we'll take a closer look at what Starbucks (SBUX 0.12%) and Etsy (ETSY 1.03%) did to get into the limelight.

Brewing up a big stock move

Shares of Starbucks climbed almost 5% Friday afternoon. The coffeehouse giant stood out for its position as a provider of one of the most sought-after consumer products, and investors liked the stability and security inherent in making an investment in the stock.

Steaming cup on a wood table.

Image source: Getty Images.

Broadly speaking, investors have been increasingly optimistic about the prospects for consumer services companies overall. Throughout much of 2020, pandemic-related restrictions on brick-and-mortar restaurant locations weighed heavily on companies in the sector. Starbucks has made the best of tough situations by leveraging technology and emphasizing alternatives like delivery, drive-thru, and remote ordering. Nevertheless, the prospects for Starbucks and its industry peers look much better in light of possible full reopenings as more people get immunized through coronavirus vaccines.

In addition, even though many people are undergoing economic struggles, the overall state of the American consumer is fairly strong. That prompted analysts at Wells Fargo to upgrade the entire consumer services sector earlier this week, highlighting Starbucks as an overweight pick. Meanwhile, analysts at BMO Capital upgraded Starbucks from market perform to outperform, boosting its price target by $18 to $120 per share. In addition to stronger fundamentals in the U.S., Starbucks also stands to gain from a better environment in China.

Starbucks stock lost its upward momentum toward the end of 2020. However, with the stock at all-time highs once again, it's possible the coffee giant can keep getting a lift this year.

Making it great

Elsewhere, Etsy shares climbed 11%. It might be a mistake to refer to an online marketplace as being old-fashioned, but most of the arts, crafts, and other unique creative materials sold on Etsy's platform definitely qualify as having little to do with cloud computing or data analytics.

Etsy closed 2020 with a bang, as fourth-quarter gross merchandise sales on the platform soared 118%. That led to a 129% rise in revenue for Etsy, and net income was up nearly fivefold. For the full year, GMS exceeding $10 billion was more than double 2019's total, and similar gains in revenue delivered net income growth of 264%.

Etsy got more popular as well. Total active sellers grew to 4.37 million, up more than 60% from 12 months ago. Buyers on the site totaled 81.9 million, higher by 77%.

Defying skeptics who've argued that Etsy's success stemmed from pandemic issues, Etsy gave favorable guidance for high growth rates to continue in the first quarter of 2021. What many might find is that having used Etsy during the pandemic, they like what they've seen and won't give it up, even when conditions in retail return to normal. That in turn could lead to share price gains that look anything but old-fashioned.

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Stocks Mentioned

Starbucks Corporation Stock Quote
Starbucks Corporation
SBUX
$76.43 (0.12%) $0.09
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$11,181.54 (0.00%) $0.00
Etsy, Inc. Stock Quote
Etsy, Inc.
ETSY
$74.80 (1.03%) $0.76

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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