Is It Time to Buy This Historically Cheap E-Commerce Stock? (Hint: It's Not Amazon)

The rise of online shopping has been one of the most notable secular trends that has shaped our economy in the past couple of decades.

Advancements in internet speeds, as well as greater adoption of smartphones, certainly paved the way for the e-commerce sector to thrive. The industry's growth is set to continue, as physical retail still commands the vast majority of spending in the U.S.

Investors looking to put money to work behind this tailwind might want to consider this historically cheap e-commerce stock. Hint: It's not Amazon.

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The market is offering this company's shares on sale

Amazon is regarded as the dominant player in online shopping, as it sells what seems like an unlimited number of product categories at low prices and with fast and free delivery. It's hard to beat that setup.

However, it's Etsy (NYSE: ETSY) whose shares are dirt cheap right now. The stock trades at a price-to-sales ratio of 2.3. In the past 10 years, its valuation has rarely been at a more attractive point.

Operating with a focused strategy

If there's a single reason that investors should be interested in Etsy, it's because the business has cornered the market for unique, handcrafted, and vintage goods, helping it differentiate itself from Amazon. A survey conducted in 2023 revealed that 83% of Etsy buyers agreed that its marketplace had items they can't find anywhere else.

Etsy's business model also aims to be asset-light. It doesn't purchase inventory, invest in warehouses, or pay for delivery drivers and trucks. It simply operates the technological platform that connects 86.6 million active buyers with 5.5 million active sellers across the world.

As a result, there is a network effect at play. More users naturally boost the value proposition. Buyers will have more places to shop. And sellers will be able to target a larger potential customer base.

Fundamental weakness makes this a risky bet

Despite what appear to be advantages, Etsy has struggled since it experienced unprecedented demand during the COVID-19 years. This helps to explain the stock trading 82% off of its record from November 2021.

The Etsy marketplace processed $2.4 billion in gross merchandise sales in the third quarter of 2025 (ended Sept. 30), down 11% compared to the same period of 2021. Consumers haven't been interested as much on spending on discretionary and one-off purchases.

At the same time, Etsy has increased expenses in areas like product development and marketing. That's not an encouraging trend.

The stock is cheap, but investors should wait for clear fundamental improvements, mainly related to growth, before buying.

Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Etsy. The Motley Fool has a disclosure policy.