What happened
Shares of Etsy (ETSY +3.07%) jumped by 25% in June, according to data provided by S&P Global Market Intelligence.
The e-commerce company's stock has rebounded off its low in mid-May and is now up 19.6% year to date.
Image source: Getty Images.
So what
Fresh from reporting a set of impressive first-quarter results, Etsy announced two acquisitions in quick succession last month. As a recap, the e-commerce outfit enjoyed a 132.3% year-over-year surge in gross merchandise sales (GMS) in the first quarter ending March 31, with revenue more than doubling year over year to $550.6 million. Net income surged 11-fold to $143.8 million on the back of a 90% year-over-year increase in active buyers.
Etsy's first acquisition was that of Depop, a marketplace for global fashion apparel, for $1.63 billion. Depop's GMS grew at nearly 80% per year from 2017 to 2020, with the bulk of its active users age 26 or under. Etsy's CEO, Josh Silverman, believes that Depop can be scaled further for accelerated growth. With the company's 30 million registered users spread out across 150 countries, the acquisition of Depop can add significant breadth to Etsy's offerings and allow it to access both the younger segment as well as the high-frequency apparel vertical.
The company also acquired Elo7, a Brazil-based marketplace for handcrafted items. The purchase, agreed on at $217 million in cash, will allow Etsy to penetrate the fast-growing Latin American market, which is seeing an explosion in the use of e-commerce. Elo7 offers around eight million items for sale and has over 40 retail categories. The platform specializes in special-event categories, such as weddings and children's parties, with more than half of the total GMS coming from these verticals.
Now what
Etsy is splashing out nearly $1.9 billion on both acquisitions to build and nurture these two brands in their early stages of growth. The company now operates four brands -- Etsy, Reverb (acquired in August 2019), Depop, and Elo7. Management sees significant potential to scale the two new brands, and these purchases have allowed Etsy to penetrate new regions and customer segments, further broadening its appeal.
