Etsy’s stock (NASDAQ: ETSY) jumped almost 16.4% in the last one week and currently trades at $204 per share. The rise was potentially in hopes of a multitrillion-dollar stimulus package once Joe Biden becomes president. Further in a recent blog post about Valentine’s Day, Etsy reported multiple positive growth figures around searches in the last three months which also seemed to have boosted the stock price.
According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price data for the last 20 years, returns for Etsy stock average close to -4.9% in the next one-month (21 trading days) period after experiencing a 23.5% rise over the previous one-week (5 trading days) period.
But how would these numbers change if you are interested in holding Etsy stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning to test Etsy stock chances of a rise after a fall and vice-versa. You can test the chance of recovery over different time intervals of a quarter, month, or even 1 day!
MACHINE LEARNING ENGINE – try it yourself:
IF Etsy stock moved by -5% over 5 trading days, THEN over the next 21 trading days, Etsy stock moves up an average of 6.9 percent, which implies an excess return of 3.9 percent compared to the S&P500.
More importantly, there is 62.5% probability of a positive return over the next 21 trading days and 57.8% probability of a positive excess return after a -5% change over 5 trading days.
Some Fun Scenarios, FAQs & Making Sense of Etsy Stock Movements:
Question 1: Is the average return for Etsy stock higher after a drop?
Consider two situations,
Case 1: Etsy stock drops by -5% or more in a week
Case 2: Etsy stock rises by 5% or more in a week
Is the average return for Etsy stock higher over the subsequent month after Case 1 or Case 2?
ETSY stock fares better after Case 1, with an average return of 12% over the next month (21 trading days) after Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 5.4% after Case 2.
In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days after Case 1, and an average return of just 0.5% after Case 2 as shown in our dashboard that details the average return for the S&P 500 after a fall or rise.
Try the Trefis machine learning engine above to see for yourself how Etsy stock is likely to behave after any specific gain or loss over a period.
Question 2: Does patience pay?
If you buy and hold Etsy stock, the expectation is over time, the near term fluctuations will cancel out, and the long-term positive trend will favor you – if the company is otherwise strong.
Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!
For ETSY stock, the returns over the next N days after a -5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:
You can try the engine to see what this table looks like for Etsy after a larger loss over the last week, month, or quarter.
Question 3: What about the average return after a rise if you wait for a while?
The average return after a rise is understandably lower than a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks – although ETSY stock appears to be an exception to this general observation.
ETSY’s returns over the next N days after a 5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:
It’s pretty powerful to test the trend for yourself for Etsy stock by changing the inputs in the charts above.
While Etsy stock may move, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Amazon vs Etsy.