It's safe to say that the investment landscape has been significantly altered by the COVID-19 pandemic. This once-in-a-century upheaval has led to some people permanently modifying their behavior as countries around the world imposed unprecedented lockdowns and border closures. Some businesses, such as brick-and-mortar retailers, have borne the full brunt of various measures to deal with the pandemic and reported plunging sales and massive losses in its wake.
However, there has been a select group of companies that have performed well despite of or as a result of the tough environment. Adapting to these new conditions, these businesses have also risen in prominence or were greatly magnified in its wake. This group of fortunate companies has managed to display stellar growth rates even as others flounder and fail.
Here are two companies that are riding on tailwinds from the crisis and are poised to deliver phenomenal gains for investors.
Image source: Getty Images.
1. Etsy
If you've searched for a personalized gift for a loved one, then you've probably heard of Etsy (ETSY -0.86%). The company operates an e-commerce platform where people can purchase unique, handmade items crafted by artisans and entrepreneurs. Etsy reported stellar performance in 2020 as e-commerce traffic surged due to the pandemic. Not only did more people flock online as lockdowns prevented them from leaving their homes, but pent-up spending demand during the holidays was also diverted to gifts, pushing many more people onto Etsy's platform.
The numbers illustrate this shift. Gross merchandise sales (GMS) doubled from $5 billion in 2019 to $10.3 billion last year, with revenue more than doubling in tandem from $818 million to $1.72 billion. Net income surged by 264% year over year to $349.2 million. The active seller community jumped to 4.1 million in 2020, up 64% year over year, while active buyers jumped by 77% year over year to 81 million. The number of new active buyers doubled from 19 million in 2019 to 38 million in 2020, further reinforcing the network effect for Etsy's platform.
The company is leveraging its "Right to Win" strategy to push for continued growth in 2021 and beyond. Search and discover will be enhanced to enable more personalized search experiences for users, while human connections will be emphasized through the use of video for storytelling. By attracting more influencers to join its platform with its unique collections of items, Etsy can continue to tap into the network effect to grow its user base. This may explain why the company's GMS growth was more than 2.5 times more than the industry's e-commerce growth rate, a trend that I believe can continue.
2. Peloton
Being cooped up at home during a pandemic means not being able to visit the gym or go for a run. Peloton (PTON -0.98%) has solved this problem by bringing the exercise to your home instead. The company, which sells exercise equipment and fitness subscriptions that allow you to work out from the comfort of your own home, reported a sterling set of earnings. Revenue soared 162.5% year over year to $1.8 billion for Peloton's fiscal 2021 first half, led by a near tripling of sales of connected fitness products and a 143% year-over-year increase in subscription revenue.
The company's operating metrics were equally impressive. Connected fitness subscriptions more than doubled from 712,000 to 1.67 million for the quarter, while total workouts quadrupled from 24.3 million to 98.1 million. Peloton ended the quarter with 4.4 million members, a significant jump from the 2 million members in the same quarter last year.
Although some people will head back to their gyms once movement restrictions ease, a large proportion should continue to stay on with Peloton as they discover the ease and convenience of working out from home. And as icing on the cake, Peloton acquired Precor, one of the largest global commercial fitness equipment manufacturers, in December last year. This acquisition should bring in a new revenue stream for Peloton by tapping the commercial market, while Precor's U.S. manufacturing facility can also help solve production bottlenecks as the company works to satisfy the high demand for fitness products.
And in yet another first for the company, it announced that it will be expanding into Australia, one of the first markets in Asia that Peloton is targeting. The official launch will take place in the second half of 2021 when consumers will be able to purchase the company's signature exercise bikes online or through physical showrooms set up across key Australian cities.
It looks like the best is yet to come for Peloton. Investors should look forward to exciting times ahead as the company continues to expand both its offerings and its customer base.
