Why Etsy Is a Good Investment
A few days before announcing second-quarter results, Etsy (NASDAQ: ETSY) -- the e-commerce website offering a marketplace for independent retailers -- enjoyed a stock price north of $70. After quarterly results that it reported on Aug. 1 failed to meet expectations for revenue, however, the stock dropped more than 20% over two days, and at the time of this writing is hovering around $50.
Despite the big drop, the stock still sports a lofty P/E ratio of 58. So is Etsy still a stock to buy?
In order to address this question, it's important for investors to understand Etsy's business model relative to brick-and-mortar retailers and e-commerce competitors. Unlike typical retail companies, Etsy doesn't sell products. It runs a marketplace by providing a software platform that enables independent retailers to sell their goods to consumers, and takes a cut of those sales. Think of Etsy as the place buyers and sellers meet to perform transactions.
Source Fool.com
