eBay vs. Etsy Stock: Which Is a Better Investment?
Two e-commerce giants, Etsy and eBay, are intriguing options for investors… but which is better? Both companies experienced a surge in sales during the pandemic. Throughout 2023, this excitement died down and consumer patterns shifted, decelerating the growth the companies saw over the past few years.
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Still, Etsy and eBay are still promising investments depending on the type of investor you are.
Better For Growth Investors: Etsy
Etsy is the more attractive option for those who prioritize growth in their investments. While eBay’s sales grew by 5% in the third quarter, Etsy outpaced it with a 7% increase. Etsy is also expanding its customer base, increasing its buyer pool by 4% to an impressive 92 million. eBay, on the other hand, saw a slight decrease of 1% to its customer base.
Etsy’s growth extends to other revenue streams, such as advertising and payment processing fees. Wall Street analysts anticipate Etsy will grow at a 7% rate this fiscal year, while eBay’s growth is expected to be around 3%.
Better for Low-Risk Investors: eBay
Growth is great, but it must eventually translate into profits. This is where eBay outshines Etsy, boasting a profit conversion rate of over 20% of its revenue, compared to Etsy’s 14%. eBay’s impressive free cash flow, nearing $3 billion or over 30% of sales, is another testament to its financial strength. Etsy’s free cash flow is smaller, as the company prioritizes re-investing in growth.
Valuation
eBay shares are trading at 2 times revenue, whereas Etsy’s valuation is higher at 3.6 times sales. For investors seeking growth, Etsy’s potential to expand its less than $3 billion sales base is enticing. Conversely, eBay appeals to those looking for stability, with its vast global presence, strong profits, cash flow and a dividend yield of 2%.
Conclusion
While both e-commerce companies are strong investment options, one might be better for you. If you’re an investor interested in a company’s potential for growth, Etsy would be a good fit. On the other hand, if you’re an investor seeking to minimize risk and increase cash flow, eBay has an excellent track record and 2% dividends.
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This article originally appeared on GOBankingRates.com: eBay vs. Etsy Stock: Which Is a Better Investment?
