We recently published a list of the 10 Cheap Internet Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Etsy, Inc. (NASDAQ:ETSY) stands against the other cheap internet stocks to buy according to hedge funds.
Would March See a Pickup in Retail?
On March 6, Jan Kniffen, CEO of J Rogers Kniffen, appeared on CNBC’s ‘Squawk on the Street’ to discuss his outlook on retail. Weaving several threads of news in the retail space, he said that the fourth quarter was great despite an awful January and February due to the weather. However, the market is going to see a pickup in March as the calendar inches closer to Easter because even in the otherwise horrible month of February, the market saw a good Valentine’s Day.
He believed that March would see a pickup because the consumer still feels healthy, even if they are nervous. Spending has been pretty good on everything other than weather-related items, but the traffic has been slow. Kniffen believed that this trend is weather-related as well. He said that he isn’t too concerned yet, but while the retail numbers today may not make one nervous, tomorrow’s numbers may have the opposite effect. According to Kniffen, retailers are only seeing a little weakness, and that’s all weather-related.
READ ALSO: 12 Best Leisure Stocks to Buy Right Now and 12 Best Apparel Stocks to Invest In.
What Could Trump’s Tariffs Mean for the Retail Industry
Talking about the potential effects of tariffs on retailers, he was of the view that power and negotiating skills make up the necessary concoction to deal with the scenario. Companies with better logistics teams, experience with dealing with tariffs strategically, and a healthy position in terms of balance sheet are more likely to do well. Therefore, companies in the sector that are well-financed, boast great teams, and are executing flawlessly will do better than those struggling with dealing with tariffs. While Kniffen said that he couldn’t claim he isn’t worried about the tariffs, he isn’t terrified of them either, as the market knows how to deal with them.
The real question he posed was whether all that the market gets is 10% to 20% in China or whether it would really get 25% in both Canada and Mexico. In the second case, the whole economy gets dislocated, the consumer gets nervous, and everyone is terrified that they will quit spending and the market may go into a consumer-led recession.
However, if the tariffs were imposed only on China, the situation might be different. China has a significant export economy and would have to absorb a big chunk of the tariffs. It did so last time as well and is likely to do the same this time as well. The market will then also see substitution, trade down, and all the stuff we see when the consumer has to deal with it. The retail market will react to all that, and the big and strong members will likely react better.
Our Methodology
We sifted through stock screeners, online rankings, and ETFs to compile a list of internet stocks with forward P/E less than 15, including stocks from the internet retail and internet content & information sectors. We then selected the top 10 with the highest number of hedge fund holders as of Q4 2024. We sourced the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of hedge fund sentiment.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A young woman shopping for a vintage fashion item online.
Etsy, Inc. (NASDAQ:ETSY)
Forward P/E: 9.46
Number of Hedge Fund Holders: 58
Etsy, Inc. (NASDAQ:ETSY) operates two-sided online marketplaces that connect sellers and buyers worldwide. In addition to its core Etsy marketplace, the company also comprises Reverb Holdings, Inc. (Reverb), a musical instrument marketplace, and Depop Limited (Depop), a fashion resale marketplace.
The company reported record revenue of $2.8 billion for fiscal year 2024, up 2% year over year. It also delivered strong profitability, with adjusted EBITDA of $782 million and margins of 27.8%.
In 2024, Etsy, Inc. (NASDAQ:ETSY) transformed by temporarily shifting its focus to holistically better customer experiences based on quality and reliability instead of near-term conversion. The company’s investments in this domain are expected to yield positive results, as it is now building on this improved foundation for 2025 and beyond. Its median price target of $46.80 implies an upside of 15.38% from current levels.
Overall, ETSY ranks 3rd on our list of the cheap internet stocks to buy according to hedge funds. While we acknowledge the potential of ETSY as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ETSY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires
Disclosure: None. This article is originally published at Insider Monkey.