Etsy (ETSY -2.35%) reported second-quarter earnings on July 27 that pleasantly surprised investors. The strong showing even came in the midst of an unfriendly economic environment for e-commerce companies. Between record-high inflation, rising interest rates, and a reopening economy, online shopping platforms have faced pressure from several directions of late.

Even after a 24% rally this past month, however, Etsy stock is still down 48% since the start of the year. With the global e-commerce market set to climb at a compound annual growth rate (CAGR) of 15.1% from 2021 through 2030, let us consider where Etsy could be by the end of the decade.

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Image source: Getty Images.

Where is Etsy today?

Etsy is an e-commerce marketplace where consumers can find handmade creations, vintage items, and one-of-a-kind goods. According to the company, its total addressable market for what it refers to as "special" goods is $100 billion, meaning that it has only captured roughly 2% of revenue potential as of its fiscal 2021 year. In its latest quarter, the company's total revenue increased 10.6% year-over-year, to $585.1 million, and its diluted earnings per share dropped 25% to $0.51, but beating analysts' expectations by 65%.  

Gross merchandise sales (GMS), which refers to the total value of goods sold on the platform, fell a trifling 0.4% to $3 billion, while active buyers and sellers rose 3.8% and 41.5% to 93,947 and 7,403, respectively. Although growth has temporarily eased, Etsy's second-quarter performance showed that its business is sticky, and consumers are going to continue using the platform even in a down market. And considering that the company is already profitable, investors should feel excited about the untapped potential of Etsy's business moving forward. 

Where could Etsy be tomorrow?

Let's suppose that Etsy expands its top line at a CAGR of just 10% from 2021 through 2030, bringing its annual sales up to roughly $6 billion. Assuming an Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin of 25%, which is slightly above last year's metric, the company would generate roughly $1.5 billion in EBITDA. At an enterprise value-to-EBITDA multiple of 25, which is below its five-year mean of 58.4 but above the S&P 500's average of 17.1, the company's enterprise value would be $37.5 billion in 2030, equal to 154% upside from today.

I think these are realistic -- perhaps conservative -- estimates for where the e-commerce platform could be at the end of the decade. Not only is it possible that Etsy could grow its top line at a quicker pace, but I also believe the company's operating margins could be higher by then. Either way, it's clear that the stock's latest sell-off grants investors a superb margin of safety right now.

Should investors buy Etsy stock right now?

Given the niche market in which it operates, Etsy is advantageously positioned to sustain solid growth in the years to follow. Likewise, the company's pullback so far in 2022 offers investors an excellent window of opportunity to purchase shares of the e-commerce stock at an attractive price. As the shift to mobile shopping continues to advance, investors will still need to distinguish between the secular winners and losers. There's no need to fret about Etsy, though -- I believe the company will wind up being one of the e-commerce industry's major success stories looking forward.