Of the three major U.S. market indexes, the tech-heavy Nasdaq Composite has had the toughest time in the past few months. This index recently fell into bear market territory -- defined as a 20% (or more) drop from its most recent high.
That certainly isn't good news, but let's focus on the bright side: Plenty of excellent stocks are struggling within the Nasdaq, and many of these companies are now being sold at a discount. Investors shouldn't miss this opportunity.
Etsy competes in the crowded e-commerce market. The company is known primarily for offering vintage and handmade goods through millions of sellers on its marketplace. That's its competitive edge: Both buyers and sellers of these goods know where to find what they are looking for. The company's platform thus benefits from the flywheel effect.
That explains why it continues to add more buyers and sellers. Etsy's active seller count grew 62.8% year over year to 7.7 million in the first quarter. The company's active buyers increased 4.9% to 95.1 million.
Etsy's platform grew substantially during the pandemic as consumers turned to e-commerce channels like never before amid widespread lockdowns and social distancing. Although that dynamic has cooled down, Etsy continues to grow its ecosystem -- a good sign for the health of its business. Pandemic-related dynamics are also affecting top-line growth for the company.
During the first quarter, Etsy's revenue increased an unimpressive (by its lofty standards) 5.2% year over year to $579.3 million. The company's gross merchandise volume -- the total value of transactions conducted on its platforms -- came in at $3.3 billion, up 3.5%. Meanwhile, its net income decreased 40.1% year over year to $86.1 million.
Decelerating growth is one major reason why investors have sold off Etsy's shares. But once the pandemic is officially behind us, expect the company's growth to stabilize. It still has plenty of white space to work with in its industry. Etsy estimates its total addressable market is worth $2 trillion, of which it currently holds a minuscule 2.6% share.
The company is likely to grab an increasingly larger slice of the pie, thanks to its leading position in this niche. That will help it grow revenue and profits substantially in the coming years, and that's why it's time to buy into this top e-commerce company.
PayPal has also been affected by pandemic-related dynamics. Slowing user growth is a major reason why investors offloaded the company's shares recently. But comparisons to the past year are unfair to PayPal precisely because of how much its business was booming during the earlier stages of the outbreak. The company recorded some of its strongest performances in history -- by the company's own words -- back in 2020.
Some of that did spill over into 2021, making year-over-year comparisons deceptive. When analyzed within the context of the trends we have seen in the past three years, PayPal's prospects remain strong. The company is still one of the leaders in the fintech and digital payments worlds. During the first quarter, total payment volume grew 13% year over year to $323 billion. The company ended the period with 429 million active accounts, 9% higher than the year-ago period.
These metrics are essential to its success, and both will continue growing. Here's why: Consumers who use PayPal's digital wallet have more choices than those who use any of the company's competing services. With an acceptance rate of 76% among the 1,500 largest online retailers across North America and Europe, PayPal is the most accepted digital wallet.
Apple Pay comes second with a 27% acceptance rate among the major retailers in these regions. Consumers will continue to flock to PayPal for that reason, and it also provides an incentive for merchants to continue adopting PayPal's digital wallet, for those who haven't already.
This is another excellent demonstration of the flywheel effect, and it highlights why PayPal is likely to remain one of the leaders in this space for many years to come. And given how much the company's shares have fallen lately, now is a great time to initiate a position. Those who do will be glad they did so in 10 years.