The pandemic has forced many of us to change the way we shop these days, bringing more and more folks online to carry out their purchases.
Evidence for the growing trend was abundant during the holidays.
For instance, e-commerce sales reached the $100 billion mark from Black Friday through Cyber Monday in 2020 for the first time ever. And online sales through the holidays increased 32.2% from the year prior to $188.2 billion, according to Adobe Analytics.
The situation has benefitted some of the leading e-commerce players, like the internet giant Amazon (AMZN) and one of its much smaller yet up and coming rivals, Etsy, Inc. (ETSY).
Both of the e-commerce companies have performed well over the past year, beating analysts’ earnings estimates for each of the past three quarters.
So as Etsy prepares to announce its fourth-quarter results this coming Thursday, let’s take a look at which stock is outperforming when looked at with my Portfolio Grader.
AMZN vs. ETSY
Amazon released its fourth-quarter report on February 2, 2021
The company achieved total fourth-quarter revenue of $125.56 billion, Amazon’s largest quarterly sales figure of all time. Up 38%, year-over-year, the company’s revenue topped analysts’ estimates for $119.7 billion. Amazon also achieved fourth-quarter earnings of $14.09 per share, beating analysts’ forecasts of $7.23 by 94.8%.
Amazon’s cloud play, Amazon Web Services (AWS), saw revenue rise 28% to $12.7 billion, year-over-year, but fell short of analysts’ expectations for $12.83 billion.
The other big company news was that Jeff Bezos said he plans to step down as CEO, though he’ll stay on as executive chairman. Andy Jassy, the former head of AWS, will replace Bezos as CEO during the third quarter of 2021. Jassy began his career at Amazon in 1997. Forbes magazine described him as “Jeff Bezos ‘Shadow.’” Jassy is also known as Bezos’ technical advisor and chief of staff, so it’s clear why he will take the top position as CEO.
Etsy is the online platform that connects millions of shoppers with sellers of handmade, one-of-a-kind goods and antique items. It was founded in 2005 to create a community where people can uncover unique items.
The company has a relatively tiny market capitalization of $27.6 billion compared to Amazon’s massive $1.7 trillion market cap.
Etsy is based in Brooklyn, New York, but it has buyers and sellers in practically every country around the world. The majority of its buyers and sellers hail from the U.S., Canada, the U.K., Australia, France and Germany. Buyers can search from more than 60 million items in several retail categories. And sellers have access to a handful of services, including on-site advertising, payment processing, shipping labels and custom websites.
The company last reported financials on October 28, 2020, when it posted blowout third-quarter revenue and earnings.
During the quarter, Etsy noted that it had 3,681 active sellers and 69,649 active buyers, or 42% and 55.4% year-over-year growth, respectively. As a result, the online marketplace achieved total revenue of $451.5 million, or a 128.1% year-over-year increase from the $197.9 million reported in the third quarter of 2019. That topped analysts’ estimates for $411.44 million.
Etsy also reported third-quarter earnings of $91.8 million, or $0.70 per share, which represented an outstanding 520% annual earnings growth. Analysts were expecting earnings of $0.58 per share, so Etsy posted a 20.7% earnings surprise.
Looking ahead to next week’s fourth-quarter announcements, analysts are expecting revenue to increase 89%, year-over-year, to $511.4 million. Earnings are anticipated to climb 132% to $0.58 per share.
Positive Earnings Doesn’t Always Mean Strong Buys
According to my Portfolio Grader tool, both companies earn a B-rating for their Fundamental Grade, and an A-rating for Quantitative Grade. Etsy has a D-rating for Analyst Earnings Revisions, while Amazon has a B-rating in the category. However, Etsy has an A-rating for Earnings Momentum, while Amazon has an F-rating. And as you can see, Amazon has a B-rating for its Total Grade and is a “Buy,” while Etsy earns an A-rating for its Total Grade, making it a “Strong Buy.”
Amazon’s Report Card Etsy’s Report Card
The bottom line is that, based on the results of this Portfolio Grader analysis, Etsy is the better buy here. Etsy’s outperformance of Amazon in my Portfolio Grader has also played out with its stock price. Over the past year, Amazon’s stock has climbed an impressive 59%. Meanwhile, Etsy has risen a whopping 323%!
Of course, my Project Mastermind system is always on the hunt for fundamentally superior stocks. On Wednesday, I released a Buy Alert for two brand-new recommendations based on my Project Mastermind system’s findings. Both companies have triple-digit forecasted earnings growth. And both have been firing on all cylinders over the past few months.
All told, I have unveiled eight new recommendations in the last four weeks. These stocks have climbed nicely higher since I added them to my Accelerated Profits Buy List, but it’s not too late to jump in. In fact, one of my recommendations from Wednesday will not be releasing its quarterly results until early March. That leaves enough time to invest before its earnings report dropkicks and drives the stock higher.
The Editor (Louis Navellier) hereby discloses that as of the date of this email, the Editor (Louis Navellier), directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Amazon (AMZN), Etsy, Inc. (ETSY)