By Jeff Reeves
One of the biggest investing stories last year was the explosive growth in e-commerce. Amid lockdowns, working from home, and the general move toward digital transactions over the last few years, the retailers that were best equipped to book transactions online made the biggest gains.
Now that the initial impact of the pandemic is roughly a year and a half behind us, Wall Street is far less interested in whether a firm is capitalizing on COVID-19 disruptions and is much more concerned with how it is plotting a way forward as things (theoretically) normalize.
That has created an interesting challenge for some stocks, as year-over-year comps aren’t quite as impressive. Adding to the uncertainty is fears that supply chain disruptions or inflationary pressures could eat into Americans’ holiday shopping habits. To top it off, fears that the stock market could be in store for a rough 2022 is only making the stakes higher for closely watched e-commerce stocks
Here are five high-profile stocks in the sector, and what investors can expect.
Amazon: More weakness to come
Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN -1.82% is the biggest dog in the e-commerce space, and the $1.7 trillion company stumbled in a big way with its third-quarter earnings. It not only missed expectations for both its profit and sales, but it announced it is expecting a significant drop in profitability amid the all-important holiday shopping season.
Admittedly, investors were expecting the earnings decline after Amazon offered a weaker forecast three months ago in its second-quarter numbers. But that doesn’t make the pill easier to swallow. Shares are now down about 9% from their summer highs and are sitting on a meager 5% gain so far this year while the broader S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.18% is up about 25% since January 1.
It seems foolish to write Amazon off as doomed, but based on the fact that these challenges have been persistent for two consecutive quarters with no clear light at the end of the tunnel, investors may want to be cautious right now.
eBay: Customer concerns crop up
In its most recent earnings report , online marketplace eBay Inc. /zigman2/quotes/204653455/composite EBAY -2.36% topped Wall Street expectations on both the top and bottom line. However, those numbers weren’t enough to satisfy investors who — like those watching Amazon — are looking more at the challenges.
One of eBay’s black clouds is its struggles with its customer base: the platform actually saw a decline in buyers overall and that those who were shopping were spending less.
True, eBay has been working hard to change that. From refurbished electronics complete with warrantees along with authentication of luxury fashion goods like handbags, the merchant is doing its best to show it can do much more than function as a digital garage sale.
Unfortunately, it may not be working. eBay reported gross merchandise volume — that is, the total value of transactions for goods sold in the quarter — slumped 10% from a year prior. Even though that topped expectations, it’s not a good sign for the long-term health of the company, or the chance of short-term success this holiday shopping season.
Another ill omen for the stock this winter: Shares are off about 6% since mid-October highs as investors digest these and other numbers. That’s not the kind of momentum you want to see as we close out the year.
Wayfair: Housewares and furniture tailwind fades
One of last year’s biggest growth stories was pandemic-fueled e-commerce shopping in housewares and furniture. Wayfair Inc. /zigman2/quotes/201071690/composite W -7.57% shares went from just under $100 apiece to the start of 2020 to more than $250 by year-end.
This year has been a different story, however. When it became clear around March that year-over-year comps were going to be very hard to replicate, the stock started to take a tumble and hasn’t seemed to find its footing since then.