Etsy is a renowned e-commerce marketplace, specialising in handmade, vintage, and novelty items such as art and craft supplies, homeware goods, DIY products as well as clothing and accessories.
The company experienced rapid growth over the past few years due to an increasing online presence in the US and globally. This was consistent with a broader transition from various "brick and mortar" retailers and vendors to e-commerce platforms.
Recent growth has been weak, however, with many consumers straying away from discretionary purchases, including products that are offered on the Etsy platform. Nevertheless, improving economic conditions should lead to a recovery going forward.
Technically speaking, the stock price has formed a broadening bottom (or "megaphone") pattern - characterised by a series of higher highs and lower lows. The stock is currently trading near the lower end of this pattern (refer to the first chart) and due to its perceived volatility, we expect an imminent bullish reversal.
Trading continues below its 200-day simple moving average (SMA) of ~$109.60 and we take a counter-trend strategy in anticipation of a price correction near term.
Our bullish stance is supported by the emergence of upside momentum as per the MACD indicator. The Coppock Curve (which recently formed a trough), as well as the On-Balance Volume indicator (which is trending sidewards) further substantiate our view.
Share Information
| Share code | ETSY US |
|---|---|
| Industry | Consumer Discretionary E-commerce |
| Market Capital (USD) | 11.48 billion |
| One year total return | -3.92% |
| Return year-to-date | -22.30% |
| Current price (USD) | 93.07 |
| 52 week high (USD) | 149.91 |
| 52 week low (USD) | 80.44 |
| Financial year end | December |
| Closing paragraph | The share price is down quite a bit this year but has significant upside potential with various technical indicators pointing toward a correction. |
Consensus expectations
(Bloomberg)
| FY22 | FY23E | FY24E | FY25E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 4.61 | 3.97 | 4.25 | 4.45 |
| Growth (%) | -13.96 | 7.18 | 4.62 | |
| Dividend Per Share (USD) | 0.00 | 0.00 | 0.00 | 0.00 |
| Growth (%) | - | - | - | |
| Forward PE (times) | 23.46 | 21.89 | 20.92 | |
| Forward Dividend Yield (%) | - | - | - | |
| Closing paragraph | Growth over FY23 will remain impacted by a weak consumer environment, though easing inflationary pressures and economic recovery should support an improvement from FY24 and beyond. | |||
Buy/Sell Rationale
Technical Analysis:
Long-term fundamental view:
| Share Name and position |
REMX - Time Exit (Close the position) |
FOXF - Buy (Continue to hold) |
JBHT- Buy (Continue to hold) |
|---|---|---|---|
| Entry | 84.60 | 105.69 | 178.77 |
| Current | 192.05 | 84.83 | 113.98 |
| Movement | 0.3% | 7.8% | 7.4% |
| Summary text | The trade has reached our intended time exit |
Price action depicting higher highs and higher lows remains attractive. The stock is trading above is 200-day and -week simple moving average. Upside momentum provides further support.
Our profit target is $126 with a trailing stop-loss of $105.80. Exit the position around 6 October 2023. |
The stock price is displaying a symmetrical triangle pattern, which remains promising. Trading continues above the 200-day simple moving average and upward momentum is supportive.
Our profit target is $201 with a trailing stop-loss of $183. Exit the position around 6 September 2023. |
| Share Name and position |
HACK - Buy (Continue to hold) |
HD - Buy (Continue to hold) |
HIG - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 47.58 | 301.09 | 70.60 |
| Current | 50.73 | 319.09 | 74.64 |
| Movement | 6.6% | 6.0% | 5.7% |
| Summary text |
The price remains above critical support levels and trade continues above the 200-day simple moving average. Upside momentum further supports our bullish stance.
Our profit target is $55 with a trailing stop-loss of $48.80. Exit the position around 4 August 2023. |
Recent price action suggests the stock is in an accumulation phase while trading above its 200-day simple moving average. Sustained upside momentum provides further support
Our profit target is $340 with a trailing stop-loss of $304. Exit the position around 15 September 2023. |
The stock is displaying an incomplete rising wedge pattern, which is attractive. The price continues to test its 200-day simple moving average. Upside momentum continues to support the bullish trend.
Our profit target is $78 with a trailing stop-loss of $67. Exit the position around 27 September 2023. |
