Etsy (WKN: A14P98) and Zalando (WKN: ZAL111) presented fresh figures this quarterly report season and showed: Their e-commerce is out. There has been at least little, if any, growth, which has caused stocks to fall further. Out with the success stories? No, not necessarily.
So let’s take a quick look again today at the problematic construction sites Etsy and Zalando. As well as why these success stories are not over yet, but only beginning in the long run. In any case, the end of the pandemic and the associated restrictions are only a short-term negative factor for me, uniting these two e-commerce stocks.
Etsy: Almost no growth in a large market
Etsy is the first e-commerce stock to come out with really disappointing earnings results this season. The online retailer only managed a 3.5% increase in gross volume of goods, but a 5.2% increase in sales and a 40.1% decrease in net income year-on-year. Admittedly, this is not the best quarter, although management has now briefly brought stagnation into play for the second quarter.
However, it is crucial that CEO Silverman in the long run says it is ideally placed for future growth. The e-commerce player has an annual gross merchandise volume of over $ 13 billion across its four platforms Etsy, Reverb, Depop and Elo7. With a single market that is said to have trillions of dollar potential, we are certainly just scratching the surface. According to some projections, Etsy accounts for less than 1% of the total long-term addressable market.
Self-made and handmade goods and a community that is just a little different can be a growth story with potential for the future. Especially since e-commerce is an intact long-term growth market that this American company specializes in. Let us also not forget that over three years, merchandise volume had still increased by 177% year over year. A short break in growth during opening hours is not a game changer in the investment dissertation.
Zalando: No growth, but priced that way
Compared to Etsy, the Zalando stock has another special feature that is even more important. Management even experienced a modest decline of 1% in revenue in the first quarter. An end to the growth story? for now. But it is also not so much when we think of management’s forecast of revenue growth of at least 12% in the current financial year.
Of particular note at Zalando, however, is that the stock is now priced as a non-growth stock. A price-to-sales ratio of around 0.8 is a really favorable valuation for an e-commerce player who wants to at least double its product volume by the middle of this decade. Even with a price / earnings ratio of now 36.7, we are now approaching a valuation position. Rising profits that come sooner or later can therefore be aimed at a particularly large change. Especially since the net profit margin was only 2%.
If we think of the Zalando stock five years ahead, the current fundamental valuation should be very cheap. It remains crucial that growth continues and that the medium-term forecast is realistic. However, e-commerce in the fashion segment also has enough room in Europe to result in solid growth.
The article Etsy & Zalando: E-Commerce is Out … currently first appeared on The Motley Fool Germany.
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Vincent owns shares in Etsy and Zalando. The Motley Fool owns shares in and recommends Etsy and Zalando.
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