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Etsy, Inc. (NASDAQ: ETSY) made its stock market debut on April 16, 2015 with an initial public offering (IPO) of $16 per share. While Etsy's share price nearly doubled to $31 in the first days of trading, the online retailer quickly entered a period of steady decline that continued into early 2016. After closing at a record low of $6.90 on February 8, 2016, Etsy stock has slowly worked its way back up to around $57 per share as of October 22, 2019.

Etsy's average daily volatility rose to 7.29% for the week of November 8, 2018, with help from several reports issued by Wall Street analysts. RBC Capital Markets rated Etsy at "Sector Perform" in a research note published on Wednesday, posting a price target of $52. Loop Capital gave the stock a "Buy" rating on Wednesday morning while setting a more ambitious price target of $57. Meanwhile, Morgan Stanley rated Etsy an "Equal-Weight" in an October 24, 2018 research note.

Etsy, which is valued at $6.9 billion at the time of writing, reported FY 2018 earnings of $604 million in revenue with a net profit of $77.5 million, or a net profit margin of just under 13%.

Key Takeaways

  • Etsy is a peer-to-peer online platform where individuals can buy and sell crafts, handiwork, and found items. Unlike eBay or Amazon, the focus is on artisan, unique or bespoke items.
  • The company IPO'd in 2015 and has risen more than 160% in value over the past four years.
  • As of October 2019, the shares have risen from an IPO price of $24.90 to around $57 per share, where it now commands a market cap of just under $7 billion.

Company Overview

Etsy is a peer-to-peer (P2P) e-commerce website where users buy and sell handmade crafts, vintage items, art, and photography. The online marketplace works similarly to Amazon and eBay, only with an emphasis on unique items rather than mass-produced merchandise. The site launched in 1998 and grew steadily in its first decade, making its one-millionth sale in 2007. One year later in 2008, Etsy received $27 million in venture capital funding.

The company announced its IPO in March 2015 and officially went public on April 16 of the same year. After a brief initial surge, the stock began declining, and by mid-June, it had fallen below the IPO price of $16 per share, with analyst Matthew Frankel at The Motley Fool ranking Etsy as "the worst IPO of 2015." Etsy has faced competition from rival Amazon's handmade section that launched in 2015 but, despite all of these setbacks, has managed to hold its ground in the emerging e-commerce industry.

How a Day Three Investment Would Have Fared

One way to determine if you should have invested in a company early is to put yourself in the shoes of an investor who got in shortly after an IPO. On April 20, 2015, Etsy's third day of trading, the stock opened at $28.77 and closed at $24.90. Let's say you invested in 100 shares of Etsy toward the end of day three when shares were trading at $24.90. Those shares would have cost you $2,490 at the time — and over the next nine months, you would have watched (and maybe winced) as the value of those shares steadily declined.

On January 19, 2016, Etsy shares closed at a record low of just $6.65. At that time, your investment would have dropped 73.29% in value from $2,490 to $665. If you held onto that stock, however, you would have watched it slowly creep up in value over the next two years. The stock would exceed its March 2015 IPO price of $16 on August 11, 2017, when the company closed at $16.22, and would double that less than a year later with a share price of $32.34 on May 31, 2018.

On October 22, 2019, Etsy closed at $57.10 per share. At that price, your shares would be worth $5,710 a 161% gain on your initial investment of $2,490.