I’ve held a high conviction in Etsy for a while but after looking closely into their Q4 earnings call, it is quite clear management are worried of rough waters ahead.
On first look, things look great for Etsy, coming out with incredible guidance for Q1 2021. But the CFO made several comments about how February was trending down from January on both GMV and take rate and how analysts should use third party estimates of worldwide ecommerce growth to forecast 2021. I’ve had a look at consensus and it is 14% this year. Now Etsy state they aim to beat the general e-commerce market, they did it by 2x last year, so if we assume a similar trend, it suggests management is thinking along the lines of 30%.
I’ve modelled out what I think their revenue will be in 2021:
Q1 - $540M vs Q1 228m in 2020 - as per Q4 call, Feb is trending down
Q2 - $500M vs Q2 428m in 2020 - lockdowns start to unwind, mask revenue gone
Q3 - $450M vs Q3 451m in 2020 - tough comps in the summer
Q4 - $700M vs Q4 617m in 2020 - should grow on their great Q4 in 2020
Based on these numbers, they’ll hit around 27% growth for the year. They were growing at about 33% in 20219 before Covid.
I may be being too pessimistic on the revenue growth, but after digesting the CFO’s comments, they are definitely warning us. Using their 15x multiple right now, this doesn’t suggest much upside is left for the rest of this year. Or does their impressive margins and bottom line see an expansion of the multiple?
Now, I am excited on what they can do on an international level, especially India, there is no doubt the brand is powerful now and the 2020 cohorts will be coming back, but will that be enough to deliver above 30% growth? I’ve been spoilt on a diet of 50%+ growers and I’m in two minds on Etsy in the short term.
Would love to hear any thoughts from the board.