The ongoing COVID-19 pandemic has acted as a massive tailwind for companies part of the e-commerce segment. As lockdowns were imposed all over the world, people turned online to quench their thirst for shopping. However, as the global economy reopens and restrictions are relaxed, several e-commerce stocks have lost momentum recently.
Etsy stock is down 20% from record highs
Shares of Etsy have gained 10% in market value year to date and are up over 550% since its IPO in 2015. Etsy’s sales grew by 141.5% year over year in Q1 to $550.6 million and its gross merchandise volume soared by 132.2% to $3.1 billion. The gross merchandise volume is the total amount of money spent on the Etsy platform.
The company’s growth expectedly decelerated in Q2 as sales were up 23.4% year over year while net income grew by just 1.9%. This coupled with less-than-impressive guidance resulted in a sell-off for Etsy stock.
However, there were several encouraging factors for Etsy investors in Q2. The company’s take rate which is its revenue expressed as a percentage of GMV rose to 17.5%. This metric indicates the value Etsy is able to derive from the transactions on its platform. Etsy has provided multiple services to buyers and sellers that include Etsy Payments and Etsy Ads which has allowed the company to increase its take rate from 15.9% in Q2 of 2020.
Etsy ended Q2 with an active buyer base of 90.5 million, an increase of 50% year over year. The number of active sellers rose 67% to 4.2 million. The GMV per active buyer was up 22% year over year which indicates higher consumer spending on the platform. These are important metrics that showcase Etsy’s widening economic moat and the network effect.
Etsy is present in just seven major markets and has massive growth potential. Analysts remain bullish on Etsy and have a 12-month average price target of $220 for the stock which is 12% higher than its current trading price.
Coupang is a recent IPO
A company valued at a market cap of $53.36 billion, Coupang went public on the NYSE in March 2021. The South Korean tech giant owns and operates an e-commerce business. It sells products in multiple categories that include home goods, apparel, beauty products, electronics, fresh, groceries, and much more.
Coupang is one of the fastest-growing companies in the e-commerce space. In the second quarter, Coupang reported its 15th consecutive quarter where revenue growth was over 50% year over year. In the June quarter, its sales were up 71% while gross profits rose by 86% compared to the year-ago period.
Coupang is also widening its portfolio of services and has introduced grocery-delivery and restaurant food delivery to its suite of solutions. The company recently launched a subscription service that is similar to Amazon Prime. It's now expanding into other South Asian markets such as Japan, Singapore, Malaysia, and Taiwan.
Coupang sales rose by 93% to $12.1 billion in 2020 and analysts expect sales to touch $19.33 billion in 2021 and $27.17 billion in 2022. We can see that the stock is trading at a forward price to 2022 sales multiple of less than two which is really cheap, given its top-line estimates. While still unprofitable, Coupang is also improving its bottom-line aggressively.
Analysts tracking the stock expect it to gain over 50% in market value in the next year, making it a better bet than Etsy.
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