1 Unstoppable E-Commerce Stock to Buy in 2022

Could Etsy (ETSY 2.86%) be one of the top e-commerce stocks for long-term investors to buy in 2022? The following segment of Backstage Pass was recorded on Dec. 22 and features Fool contributors Rachel Warren, Danny Vena, and Deidre Woollard.

In this clip, they discuss a recent article by Bloomberg noting the continued (and to some, surprising) success of several brick-and-mortar retailers and their strong growth during the recent holiday season, as well as the tremendous potential Etsy has for long-term investors. 

Rachel Warren: "The big-box chain store increased its sales approximately 10% in November, according to Bloomberg Second Measure which analyses U.S. consumer transactions to measure revenue", the article said. Bloomberg also reported that "Target's (TGT -0.36%) gains have doubled the rate of top rivals like Walmart (WMT -1.75%) and Amazon (AMZN 1.30%)".

There were some really interesting things to point out from this article that I want to touch upon before I get to my question here. We know Target was an essential retailer earlier in the pandemic. That enabled it to continue staying open and building both its in-store and e-commerce presence, while other stores had to shutter for a period.

There was a quote in this article by a real estate developer named Rick Caruso. He was saying, "I've been hearing experts talk about the death of brick-and-mortar retail for 30 years." He said, "That's silliness, there are going to be winners and losers, but that's any industry."

What's also interesting to me from this article it said, "other discount chains besides Target are winning too. Foot traffic at HomeGoods [a part of TJX Companies (TJX 0.45%)] this holiday season is 15% above where it was two years ago. By that measure, TJ Maxx, which is owned by the same parent company, as HomeGoods is up 9%"

This is interesting to me, I think a lot of people have written off brick-and-mortar retail as we continue to move into different phases of the pandemic. I know that's something I have thought of.

I still think e-commerce will win in the end in terms of the larger portion of retail sales. But we'll see, perhaps I will be proven wrong. What's interesting here also is that "these gains in brick-and-mortar retail have largely been won by big chains", Bloomberg reports, "because so many independent retailers have had to go out of business during the pandemic".

Apparently, nearly half a million small U.S. companies in the retail and hospitality industries didn't make it out of the pandemic. A lot of the business that might have shifted to those smaller mom-and-pop stores, has in fact shifted to these larger brands. Here's my question.

Danny, I'll let you take this one first. In your opinion, we look at the changing face of retail. We look at this data from the holiday periods shipments as we talked about last week, are moving right on time. Target is continuing to market these wins. What is another retail stock that you think is really likely to benefit from these trends that we're seeing?

Danny Vena: Before I answer that question, I wanted to mention, Target's management looked really brilliant for making the purchase of Shipt, a company that does the last-mile deliveries before the pandemic and expanding that so that when the pandemic hit, they were ready with their omnichannel, whether it'd be in-store or pick up in the parking lot or actually having stuff delivered, they were ready for that. I thought that that made them look particularly smart.

Having said that, I'm going to go sideways a little bit. We're talking about the changing face of retail. I agree that there are a lot of people out shopping in stores right now because people have been wanting to get out of their houses.

They've wanted to go shopping. I think that the novelty on that is going to wear off, particularly with the spread of the Omicron variant and the fact that there are still people shopping, have been shopping for Christmas for several months.

I think one of the companies that's going to benefit from just the overall environment is Etsy. Etsy is one of the leaders when it comes to handmade goods, vintage items, one of a kind pieces. It's one of the companies I've followed since the pandemic. This is another one that I think was incorrectly labeled as a pandemic stock.

People figured well, once they got out of the pandemic, people were going to stop shopping at Etsy. That has proven not to be the case, although its growth rate did slow somewhat. I am going to quickly share their most recent quarterly results.

As you can see, their revenue so far this year is up 45% year-over-year. Although in the most recent quarter, similar to what we saw with Roku (ROKU 5.41%), revenue was only up 18% year-over-year in the third quarter.

I think the reason for that is like we have talked about the fact that shoppers are actually going out to the stores. But that doesn't necessarily mean that all of the shopping is going to be done there. I think writing off Etsy at this point is foolhardy.

I heard the CEO on an interview where he said that because of the supply chain logistics and because so many companies get their stuff from overseas and things are stuck on containers and shoppers are starting to get a little frantic about the holidays, they could turn to Etsy because the people that sell on that platform buy locally and they create stuff themselves.

They weren't necessarily hampered by the supply chain logistics and they could adjust on the fly. I think people who buy Etsy right now are going to be pleasantly surprised by how well they do over the coming quarter.

Warren: I love Etsy. I'm also an investor in that company and it's a great point you made about how it's been so resilient, particularly with the supply chain issues. 

Because as you said, a lot of these individuals, the sellers, they're all over the world. Some of these items are handmade. Some of the items you find are vintage.

They just have a stockpile of items, maybe they found a local vintage shop. There's no issue there.

It's definitely a go-to place if you're looking for a special gift. I feel like this year, when I've been on YouTube, I've been seeing their ads all the time. I think that they are really positioning themselves well in this changing retail environment.

Vena: One of the things I wanted to mention too, is that my wife and I went to the mall last week. One of the things that we saw was this one shop that it's a small shop that sells handmade goods.

They said that they were the brick-and-mortar equivalent of Etsy. [laughs]

Warren: That's awesome.

Vena: Which really goes to how Etsy has really pervaded that marketplace, and now people are comparing themselves to Etsy.

Warren: That's awesome. What about you, Deidre?

Deidre Woollard: I think the other thing I like about Etsy is the acquisition of Depop too because I feel like resale is one of the biggest categories and something that's so attractive to younger generations and just keeps growing. I think that is another area that makes Etsy really attractive.