Etsy review and Saul numbers

Saul recently posted this – “Etsy sales going over a cliff!” -…. His point (paraphrased in my head) is that 142% of revenue growth is due to Covid revenues and that if numbers are corrected then Etsy is looking at about 28% growth when Covid stops having an impact.
The guidance going forward is $524M, and that would lead to very difficult comps going forward and that shock could be dramatic. (I am assuming that implies a stock price hit? Or does it mean a permanent business growth hit?) ((First one would be painful, but second one would destroy my investment thesis.))
OK, so, that means I had to suffer through doing all kinds of maths that I HATE. I am a words and logic guy, numbers have never come easily to me. (My SnapChat posts have been my one attempt to put Saul numbers to a stock I own, trying to learn here.)
My premises:

  • Etsy is an under rated sales platform compared to SHOP, Ebay, Amazon, etc.
  • Etsy has been slowly (compared to most Saul stocks) but steadily growing and has years ahead of it
  • Etsy is strong enough to be one of my top five holdings that make up >35% of my portfolio

These numbers start with 2019.

Revenue – is it really growing like I believe, or is it masked like Saul’s post says.

**Revenue $mil**						
	*q1	q2	q3	q4	yr*
2019		169	181	192	270	818	
2020		228	429	451	617	1700	
2021		551					
**Revenue Growth**						
	*q1	q2	q3	q4	yr*
2019		40%	37%	28%	35%	36%	
2020		35%	137%	128%	129%	111%	
2021		141%			

In 2019 Etsy bought Reverb for cash. Those numbers started to be included by Q3 2019. It doesn’t show very much in the revenue growth or dollars, but it also didn’t hurt earnings. That seems to make it a nonevent here? (I had believed this to be a net positive, but since they paid in cash and are not losing, I guess it is neutral.)
In Q2 2020 Covid hit and masks became the super story of the world. Etsy immediately shows growth in Q2 and they start to call out mask sales in their presentations. They list $346M in GMS (Gross merchandise sales is the dollar value of items sold) for masks in Q2. This can’t ALL be net new sales, my assumption is part of this is redirected customer money. If the QoQ growth rates of early ’19 apply, then taking ~ +16% of $228 you get $364.8M. Back that out of the $429 and masks added $64M, or only about a 15% boost. (Please check my numbers! I hate them.)
What is interesting about the Covid mask angle, is that Etsy has stopped breaking those numbers out recently and yet revenue continues to climb. My gut says there can’t be THAT much sustained growth on just mask sales. So since Q2 revenue is up 30% over three quarters. (This is not to stronger Q4, but all the way to ’21 Q1 which is strong in relation to other Q1’s, but lower than ’20 Q4.) That looks like solid growth, but not Saul numbers.
So this doesn’t shake my long term view, but probably doesn’t help the Saul inclusion chances.
Next we have numbers that show the growth in the GMS over time. To me, I think this is different from revenue in that this shows that the overall “value” of the products being sold is going up. If sellers are able to get more $$ selling goods, that should be positive to the growth story. (?)

**GMS ($Bil)**				
	*q1	q2	q3	q4	yr*
2019		$1 	1.1	1.1	1.7	5
2020		1.4	2.7	2.6	3.6	10.3
2021		3.1								

**GMS Growth**			
	*q1	q2	q3	q4	yr*
2019		18%	23%	22%	32%	27%
2020		33%	147%	117%	118%	106%
2021		128%		

These numbers show the same Covid bump in both totals and growth in ’20 Q2. What these numbers show to me is that while the totals seem steady, the actual YoY quarterly comparisons come back down pretty quickly. They are still up overall, but they lose 30% in just one quarter as everyone had their masks for Covid. Does this mean that the jump from ’20 Q1 to ’21 Q1 is the actual normalized GMS situation? (If I go back to the revenue growth of QoQ 15% boost attributed to masks, then we are looking at about 100% growth numbers by backing out mask impacts. Assuming that Q1 is still having Covid boost?)
Etsy also breaks GMS out by the buyer and that shows good trends overall. So each buyer is spending more, and growth in that spending appears to be accelerating.

**GMS per Buyer**			
	*q1	q2	q3	q4*
2019		99	100	101	103
2020		104	106	110	117
2021		124			
**GMS Growth per Buyer**				
	*q1	q2	q3	q4*
2019		2.0%	1.3%	1.8%	3.8%
2020		4.1%	6.0%	8.2%	13.0%
2021		20.0%			

So these are numbers I like. As they increase the number of buyers (both repeat and new) the overall spending per buyer is going up.

Lastly there are some interesting numbers that break out revenue by market place (what Etsy makes when people sell something) and services (what Etsy offers to help sellers). I really like that they are working on the services side, as that would seem to be a more guaranteed form of income. Not sure how to interpret the numbers here because while service revenue is growing, the % of revenue seems mostly static. However, then on flip side that is just because the market place revenue is climbing just as much as the services revenue. This is still a neutral to me as I WANT to see much more revenue % from services, but you can’t sell those services if you don’t have a market place…hmmm.

**Divisions Rev ($mil)**					
			q1	q2	q3	q4
Marketplace	2019	126	134	141	190
		2020	156	332	342	473
		2021	413			
			q1	q2	q3	q4
Services $M	2019	42	46	56	80
		2020	72	97	110	143.8
		2021	137			
			q1	q2	q3	q4
Services %total	2019	25.0%	26.0%	28.0%	29.6%
		2020	32.0%	22.0%	24.0%	23.0%
		2021	24.9%		

So. HA. I guess I have done all this and then totally lost track of what I am feeling/thinking. It seems that this is still not a Saul stock (it is def not a SAAS stock) but I think the growth is steady and looks to still have room to go. The averages over last year appear to be about 100% growth in revenue, but how much is Covid still? Then you have growth per buyer staying in the high teens which seems low for this board.

I will continue to hold, and with today’s over 10% drop (14% at this moment) it seems like I want more of the slow steady growth as part of my portfolio. The (assumed) warning from Saul still applies, that there may be more (maybe better) buying opportunities when the market realizes that 141% growths won’t happen again.

Shrug, my thoughts fell apart after all that math. Still posting and hoping not to violate the rules here. You can send me feedback directly, or if there is more of a Saul like spin on this, then please provide your thoughts.


Ha…at least I think somewhat like others here.

Previous thread that was linked in other Etsy convo, here are thoughts from draj. I pulled out masks as well and showing pretty good numbers there just like this thought.…

dlbuffy, I had position in ETSY till their report yesterday. All ur analysis is great, and I’m pretty sure that long term Etsy will do fine. However, I think that it does not belong to our board’s portfolios with such growth it guided. With growth in 20s or 30s it will never reach multiples which our companies have.

Bottom line is, with expected growth of 5-15% GMS and 15-25% revs (even if sandbagging) the company does not belong to hyper growth portfolios. In LTBH portfolio it will most likely do fine long-term (depending on further business results), but it just not the way we invest here.

I think that Bear wrote some time ago - don’t overthink investment thesis - stick with simplicity. If numbers do not match (hello FSLY :)), just move on.




I just ran through the numbers.

If you subtract out the massive effect of masks in Q2 20 from ETSY, and assume they sand-bagged and GMS comes in at 20% growth, it would really equate to 35% to 40% growth. (for those interested, it would be GMS of $2.34B going to $3.23B)

That’s still a massive slowdown from 93%, 80%, 110%, and 126% growth in the previous four quarter after accounting for Reverb & masks bumping GMS up, so I can see why Saul would warn.

But I’m fine with it.




I didn’t wade through all your arithmetic. I’ll just grant that you have done your homework and it’s probably mostly correct.

And I’ll also grant that long term, meaning five years or so, Etsy will not just be around, but it will dominate it’s ecommerce niche. To which I say, so what? For the next year (at least) until Etsy laps the Covid driven sales the stock price will languish, in fact I think it much more likely that it will shrink.

If you sit on Etsy and its stock price shrinks even more than the 14% it gave up after the earnings report it will be an anchor on your portfolio and depress your overall returns based on whatever percentage of your portfolio is in Etsy. While we invest in companies, the goal is growth of the portfolio.

Yesterday morning Etsy was about 6% of my portfolio (the day before it had been more). Yesterday afternoon Etsy was 0% of my portfolio.

The way I look at it is that it doesn’t make any sense whatsoever to hold an anchor because it will be a dominant company in 5 years when the money can be invested in a racehorse right now.

Like Saul, I always invest in a company with the attitude that I will stay invested because it’s a great company. But the pragmatic reality is that 4 - 6 quarters (or more) of a go no where investment is too long when there are so many much better long term alternatives that are performing well today and have a high likelihood of continued high performance.

I am now long Zoom Info. I think it very likely that ZI will outperform ETSY over the next year at least.


brittle rock,

I totally understand where you’re coming from. Have no problem wrapping my head around why someone would sell.

My investing goal, however, is probably different from most on this board. It’s not to maximize returns, thus, it work for me. At the same time, I get immense value out of immersing myself in the thoughts presented here.