The Nasdaq Composite Index soared 32% during the first six months of 2023, a very exciting rebound following the double-digit decline last year. But not all stocks have fared as well as the overall tech-heavy index. 

Etsy (ETSY 0.34%) is the perfect example of a business that's been disappointing to investors. As of July 3, shares were down 29% this year and 71% from their November 2021 all-time high. Despite this poor recent performance, there are still some valid reasons for investors to buy the stock right now. 

Let's take a closer look at the online marketplace known for its unique and handmade merchandise. 

A more reasonable valuation 

Because Etsy's stock has been hammered over the past year and a half or so, the valuation is a lot more attractive. Shares trade at a trailing price-to-earnings (P/E) ratio of 36. That's much cheaper than the stock's five-year trailing average P/E multiple of 70.

And the forward P/E ratio of 20 also looks compelling, especially for a business that is projected to grow revenue and earnings per share at compound annual rates of 12% and 27%, respectively, between 2023 and 2027. 

Wall Street analysts are optimistic; the average consensus price target of $113.90 is roughly 33% higher than the current stock price. That can give investors some confidence about owning the business. 

But on the other hand, there are now more analysts recommending selling shares than just one month ago. To be clear, it's best to take these price targets and estimates with a grain of salt. Not only are they always changing, but they also tend to be very focused on the short term.

The fact that more analysts think it's a good idea to sell the stock could actually present a better buying opportunity for long-term investors. 

Powerful network effects 

Probably the most persuasive reason for buying this company for your portfolio is the presence of network effects. Etsy's 95.5 million active buyers come to the platform because 7.9 million sellers are there offering a wide range of products. And these sellers run their businesses on Etsy because of the huge global customer base. The marketplace only gets stronger over time as more users join. 

By having network effects, Etsy runs an asset-light business model. And this leads to strong financial performance.

In 2022, the company's 28% margin for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was higher than the 23% margin reported just three years ago in 2019, demonstrating clear scalability. This metric could continue expanding in the years ahead. 

A long-term catalyst 

Although inflation has cooled in recent months, it remains above the Federal Reserve's 2% target. And investors are still worried about the threat of a recession that could derail the economy. These are certainly things to pay attention to. An economic downturn and the impact of lower consumer discretionary spending can be viewed as a major headwind for the company.

But Etsy benefits from the long-term secular trend of the growth of online shopping. The pandemic proved to be a boon for the business and the e-commerce sector in general. But with economies reopening and consumer behavior normalizing, in-person shopping has bounced back. 

According to data from the Federal Reserve Bank of St. Louis, online shopping accounts for only 15% of total retail spending in this country. To be clear, not all commerce will eventually occur via digital channels. I don't know if 50% will.

In fact, it's anyone's guess what this penetration rate will be. But as this 15% figure steadily rises over time, a company like Etsy is in a good position to capture some of these gains.