ETSY or SHOP

August 23, 2020
August 23, 2020 Ryan

ETSY or SHOP

Etsy and Shopify have both been on a absolute tear this year thanks to the covid pandemic.  Both were strong companies before covid, but the rise in the stay-at-home-and-start-your-own-gig movement has driven these stocks to all-time highs.  But, which one would I buy and when?

Currently, I’m in neither.  However, they are still very interesting to me at the right price.  When comparing the two, you can see that they generally move in tandem.  Of late, ETSY has outperformed, but I assume that’s a temporary movement and they will align again soon.  So, these stocks are basically attracting the same buyers for the same reasons.  So, maybe just pick one?

 

When comparing analyst targets, SHOP’s average target (29 analyst) is 1094 (currently 1021), while ETSY’s target is 153 (currently 130).  So, analysts think that both of these stocks have room to run.  What’s interesting, however, is that ETSY has dropped its number of analysts significantly.  Loss of interest?

ETSY trades at 9.7X forward 12-month sales, which marks a discount against its own one-year highs of 12X, and looks even better compared to Shopify’s 42X.  So, ETSY is cheaper, yes?

Lastly, the charts are telling us that SHOP is experiencing a MACD and RSI divergence to price.  That might signal a weakening demand and a pause is upward movement.  If the charts moves south as I anticipate, I would watch the 980 range for possible inflection point.

Regarding ETSY’s chart, it’s also a little over extended, but RSI remains strong.  However, there is some weakness under the hood, so I would be a potential buyer around 113 (that’s a fairly strong pullback).

In summary, both of these already strong companies have benefited from the stay-home economy. However, the charts have lost some of their strength.  My play is to wait and look for fairly significant pullbacks in both before adding long.

 

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