Covid e-commerce rally pressures Etsy and Wayfair to show investors they have long-term durability

Published Mon, Nov 2 20201:32 PM EST

For online retailers Etsy and Wayfair , 2020 got off to an ugly start. Wayfair cut 3% of its workforce , or about 500 jobs, in February because of mounting losses. By mid-March the stock was down over 70% for the year. In early April, Etsy withdrew its guidance for 2020 after business dipped due to the coronavirus. Their fortunes changed quickly and dramatically. Both sites became havens for consumers trying to weather the pandemic, resulting in two straight quarters of triple-digit revenue growth at Etsy and Wayfair's fastest expansion since going public in 2014. Now, both stocks are up over 180% for the year, including gains of more than 2% on Monday, topping Amazon's 61% rise. Wayfair's market cap has topped $24 billion, and Etsy is now worth almost $16 billion. But these companies aren't Amazon, a $1.5 trillion behemoth that's proved it can generate investor returns regardless of economic conditions. Etsy and Wayfair are thriving today amid mass store closures and a rapid shift in consumer spending away from travel and towards material items for their home and their health. Some of that spending was driven by government stimulus checks that have ended and, depending on what happens in Tuesday's elections, may or may not come back. Heading into the holiday season, the pressure is on the e-retailers to prove they can keep luring back customers who would rather not buy everything on Amazon. Entering a wildly uncertain 2021, investors want to know if the companies can meet their elevated expectations in an up, down or flat economy. Wayfair reports on Tuesday Wayfair, which specializes in furniture and household goods, is set to report third-quarter results before trading begins on Tuesday. Analyst estimates have been steadily rising, and they now expect sales growth of 58% to $3.65 billion, according to Refinitiv. That's up from 35% growth in the same period a year earlier. Excluding some costs, Wayfair is expected to report a profit of 80 cents a share after losing $2.23 a share a year earlier. Etsy, an online marketplace that connects small retailers with buyers, updated investors last week with its third-quarter results . Sales soared 128%, quadruple its growth rate from a year earlier. It guided for fourth-quarter growth of 70% to 90%,