eBay vs. Etsy Stock: Which Is a Better Investment?
Written by
Rebecca Neubauer
Edited by
T. Woods
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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.
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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