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It's Time to Stop Calling Etsy a "Pandemic Stock"

By Nicholas Rossolillo - Mar 4, 2021 at 8:12AM

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Etsy is a best-in-class e-commerce business. Period.

Etsy (ETSY -10.47%) just turned in its final quarterly report card for 2020, and it was a doozy. Sales on the online marketplace for handmade goods more than doubled again during the busy holiday shopping season, and management expects that momentum will continue during the first quarter of 2021.

Etsy has certainly gotten a bump from the pandemic. It's unlikely its sales would have increased at the rate they did in 2020 without lockdowns on the economy. However, Etsy was a great growth story before COVID-19 and will continue to be, even after the pandemic is well behind us.

The 2020 numbers have one more quarter to go

Etsy stock's more than 370% run-up since the start of 2020 has been driven by booming activity on its online platform. In the fourth quarter, gross merchandise sold (GMS) rose 118% to $3.6 billion, equating to revenue of $617 million (up 129% from 2019) and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $192 million, up 252%. Both figures completely smashed the company's own guidance provided a few months ago.

Full-year financials were superb for Etsy, as it picked up about 1.5 million new sellers and 36 million new active buyers (for a total of 81.9 million) in 2020. 






$10.3 billion

$4.97 billion



$1.73 billion

$818 million


Adjusted EBITDA

$549 million

$186 million


Free cash flow

$672 million

$192 million


Data source: Etsy. 

Etsy CEO Josh Silverman said he and the top team fully expect growth to decelerate later this year as the company begins to lap the initial effects of the pandemic last spring. Nevertheless, there's one more quarter of epic triple-digit percentage year-over-year increases, as Q1 2021 is still lapping pre-pandemic financial results. Etsy said to expect revenue growth of 125% to 135% in Q1 (to $513 million to $536 million) and adjusted EBITDA margin to be about 32% to 34% (it was 32% in 2020). 

A mini grocery cart with a face mask and shipping boxes sitting on top of a laptop.

Image source: Getty Images.

This isn't a pandemic stock

For all of the advances Etsy made last year, this is still a small company in the grand scheme of things. E-commerce is a massive industry worth hundreds of billions of dollars in spending every year. Amazon's online sales and third-party services were a mind-boggling $278 billion in 2020, so suffice to say that Etsy has lots of room to keep going. 

In the year ahead, a top priority at Etsy is turning its massive increase in new buyers into more frequent shoppers. After all, Etsy says it only has 6.5 million "habitual buyers," and only another 32.3 million buyers made more than two purchases in the last year (what Etsy calls a "repeat buyer"). Improving site search and merchant selling tools will be at the heart of converting more infrequent shoppers into raving fans.

International e-commerce growth is also a big opportunity. International GMS was 41% of the total in Q4, up 152% from a year ago. And GMS increased 189% and 109%, respectively, in the U.K. and Germany.

Etsy is launching new ad campaigns in its overseas markets to build on its momentum as a top-of-mind shopping destination. And of course, a frequent distraction last year was the outsized contribution face masks provided to overall growth.

However, face mask sales were just 4% of GMS in Q4, and non-mask GMS was up 118% in the final months of the year. Etsy said half of the face mask buyers from Q3 came back to the site for a non-mask purchase during the holiday shopping season.

It's time to dispense with the talk that Etsy is a pandemic stock. This is a growth story, period. It did get a big bump from the pandemic, but Etsy is doing plenty to help itself, too. It's in control of its destiny and growing quickly as e-commerce continues to expand around the globe.

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