Investing in Etsy: Is It a Millionaire Maker Opportunity?

Etsy: A closer look at the investment potential

It's easy to be overly pessimistic about Etsy, but there are reasons to be bullish. For many investors, an ideal outcome is to find a business that can turn relatively modest investments into a $1 million position one day. By focusing on high-quality businesses trading at compelling valuations, getting to that seven-figure number is a possibility over the long term.

Etsy's business is struggling

The first-quarter report Etsy delivered on May 1 clearly upset Wall Street, based on the stock's immediate 15% drop in its wake. The numbers point to continued struggles for the business.

• Gross merchandise sales totaled just under $3 billion in Q1
• Spending on the platform has slowed dramatically

CEO Josh Silverman said on the earnings call, "So far, 2024 is still proving to be a cyclically challenging period for us." Etsy faced the same problem in 2023 -- softer discretionary spending behavior among consumers.

Etsy has attractive qualities

For starters, its user base keeps expanding. It had 96.4 million active buyers and 9.1 million active sellers in Q1. People are clearly intrigued enough to come to Etsy. The hope is that its growing cohort of users leads to higher gross merchandise sales.

1. Profitable and free cash flow positive in Q1
2. Expanding user base creating network effect
3. Consistently profitable, with opportunities for growth

The valuation is compelling

• Stock trades at forward P/E ratio of 13.5
• Expectations for market-beating long-term returns
• Risk-reward setup offers attractive chance for investors

Etsy might be an opportunity to achieve market-beating long-term returns. Investors who can put more money and have an extended time horizon stand a chance at becoming millionaires from this stock.