Please ensure Javascript is enabled for purposes of website accessibility

Etsy Dives Into Fashion With $1.6 Billion Acquisition of Depop

By Jon Quast - Jun 2, 2021 at 8:40AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company is paying a high multiple for a chance to get in on the fast-growing clothing resale market.

E-commerce company Etsy (ETSY 4.48%) is acquiring London-based Depop in a $1.6 billion deal. Etsy is a marketplace for buying and selling handcrafted products. But with this acquisition announcement on Wednesday morning, the company is broadening its horizons into the apparel resale market with Depop's platform. 

According the official press release from Etsy, Depop will remain a stand-alone platform and will keep its headquarters in London. 

A woman looks at a tablet device while standing in a closet full of shoes.

Image source: Getty Images.

Etsy is acquiring Depop at a pricey valuation. Depop generated revenue of $70 million in 2020, which was up more than 100% from 2019. But this means Etsy is acquiring Depop at a price-to-sales (P/S) ratio over 23. For perspective, Etsy stock trades at a P/S ratio of around 10. And Depop competitor Poshmark trades with a P/S ratio of around 12.

Buying at a pricey valuation implies that Etsy has high conviction in Depop's ability to grow. And indeed, Depop's market opportunity is large and growing fast. According to the company, the fashion resale market is expected to be worth $64 billion by 2024 in the U.S. alone, growing at a 39% annual rate between now and then. That's certainly a good thing for Depop. But there is a growing number of players in the space to compete with, including Poshmark, ThredUp, and The RealReal.

Etsy management will discuss more details of the transaction in a conference call scheduled for 8:30 a.m. EDT.

Jon Quast owns shares of Etsy. The Motley Fool owns shares of and recommends Etsy and Poshmark, Inc. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Etsy, Inc. Stock Quote
Etsy, Inc.
ETSY
$119.82 (4.48%) $5.14
The RealReal, Inc. Stock Quote
The RealReal, Inc.
REAL
$2.78 (-12.03%) $0.38
Poshmark, Inc. Stock Quote
Poshmark, Inc.
POSH
$11.40 (-11.49%) $-1.48
ThredUp Inc. Stock Quote
ThredUp Inc.
TDUP
$3.27 (3.00%) $0.10

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
389%
 
S&P 500 Returns
125%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.