Is This Etsy's Single Biggest Risk?
Although shares of (NASDAQ: ETSY) are up 109% over the last five years, they are currently 70% below their November 2021 peak price. Following a pandemic-driven explosion in demand for the online marketplace, last year was a bit of a normalization period that saw gross merchandise volume (GMV) and sales numbers decelerate.
Many investors are also certainly worried that a potential economic slowdown will negatively impact Etsy's business. While this fear is definitely a real issue to consider, I believe it feeds into an even bigger risk for this top e-commerce stock. Let's take a closer look at what investors should know.
There are a few important reasons why Etsy is an attractive company to own. For starters, it doesn't carry any inventory on its balance sheet because it's just an online marketplace that connects buyers and sellers, collecting fees from the transactions that happen. This capital-light model has resulted in improved profitability over time (except in 2022 due to a one-time impairment charge) and a lot of free cash flow.
Source Fool.com
