Etsy (ETSY 0.26%) posted financial results for the fourth quarter of 2021 that exceeded Wall Street expectations on both the top and bottom lines, but the stock has lost 40% of its value this year. Investors worry that the first quarter's sales projection of $577.5 million (at the midpoint) is less than anticipated, indicating a more mature industry and the end of the enormous gains made as a result of the epidemic.
But rather than concentrating on a certain quarter's results, it is preferable to zoom out and consider Etsy's long-term potential. Investors shouldn't be concerned about this top e-commerce stock's sales growth slowing down. They ought to be thrilled about the enormous $2 trillion potential that lies ahead.
Despite having users in several nations, the management team of Etsy views the following seven markets as its primary geographies: the United States, United Kingdom, Germany, Canada, Australia, France, and India. Etsy is investing in better product development and marketing skills because it views these nations as big growth possibilities.
Management estimates that the cumulative retail volume in these seven areas for the product categories that Etsy serves on its marketplace is $2 trillion. These include goods like furniture for the house, jewelry, materials for crafts, clothing, baby supplies, and cosmetics.9% of the current relevant e-commerce opportunity.
The company's 7.5 million active sellers (up 72.3% year over year) and 96.3 million active buyers (up 17.6% year over year) demonstrate how increasingly consumers are looking to shop online for special, one-of-a-kind, and handcrafted goods, the very kinds of products that Etsy specializes in providing. Spending money on conversion rate and frequency improvements will encourage increased levels of activity.
However, the epidemic boosted online sales, and this industry is expected to continue to gain for a very long time. The massive worldwide retail sector is something that management wants to further penetrate. This should also be a priority for investors.