Covid-19, as unfortunate as it was, brought a silver lining for certain businesses and accelerated already existing trends. The industries that benefitted, thanks to this pandemic, made more profit than they had pre-COVID-19. Etsy, Inc. (Nasdaq: ETSY) is one such company. And now that the holidays are fast approaching, things are about to get rosy again.
(Source: Giftpundits)
Etsy, a platform where sellers sell their creative items to buyers, saw revenue reach new peaks in FY 2020 by as much as 110% y/y and net income soar by 264.2% y/y.
(Source: Etsy)
Now, you could say that the revenue growth has dwindled post-COVID-19, and it’s understandable. Many people have returned to buying their items from brick and mortar stores and Etsy sales have taken a hit.
But with the holidays fast approaching, it’s that time of the year when Etsy has much to smile about. People are going to want to buy creative gift items for their loved ones, and Etsy offers them just that. The company’s annual report testifies to this usual spike in sales around the last quarter of every fiscal year. For instance, you’ll notice that there’s a drop in revenue from Q4 of 2020 and Q1 of 2021 despite a strong Q1.
(Source: Etsy)
But what’s the outlook of Etsy stock post-holidays?
If there’s any reason to believe that the Etsy stock wouldn’t continue its bullish charge, the positives around the company definitely outweighed it. According to the business structure Etsy adopts, the company makes it easier for sellers to sell items they would otherwise have problems selling anywhere else. As a result, the company can extend its tentacles deep into the cultures of its users, since they basically run what’s being sold and bought on the platform.
With its four marketplaces (Etsy, Reverb, Elo7, and Depop), Etsy aims to improve its attractiveness to wider arrays of targeted customers, such as people in Gen Z. Etsy also continues to make new improvements to its platform to improve customer retention rates and to squeeze more engagements out of their buyers and ultimately cause them to spend more on the platform. The results of the company’s effort are evident in its 22% y/y growth in buyer frequency in Q2 2021.
Technical Analysis
The Etsy stock has mounted a challenge on its previous all-time high, and it has one. It has attained a new all-time high of $256. However, it hasn’t quite completed its breakout from the $241 – $252 resistance level.
There isn’t much to analyze on the Etsy stock anymore. Everything points to the continuation of the bullish run. We have only to wait for the stock to complete its breakout and soar into new and uncharted territories. However, if this breakout fails and the price falls below the resistance level, the stock may rally on the support trendline to mount another attack on the resilient resistance level.
Option Positioning
Currently there are around 75K call and 102K put options in ETSY. There are no short-dated expiries with massive positions and the major strike option traders are looking at is not till Jan 22. Currently option positioning suggests support around $200 which is currently in between our two levels, but may provide a good liquidity zone for traders to get long.
FULL DISCLOSURE: Chris Capre currently has no stock or options trades in $ETSY If you’d like to learn more about Chris’s trades and positions, you can get access via the Trading Masterclass where he shares his live trades, further investment ideas and daily market analysis.
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