(May 5): Shares of e-commerce companies from Etsy Inc to Shopify Inc tumbled on Thursday after weaker-than-expected quarterly earnings and forecasts deepened concern that the pace of online shopping has slowed.
Etsy sank 17% after providing a second-quarter gross merchandise sales forecast that fell short of analyst expectations, while Canada’s Shopify dropped 17% in New York trading after merchandise volume and revenue for the first quarter failed to meet analyst expectations.
The flurry of disappointing results and guidance follows Amazon Inc.’s historic rout last week after the tech giant reported a revenue forecast that came in below what Wall Street had projected. Amazon’s shares have slumped 35% from their peak in July, including a 3.6% drop on Thursday, wiping out nearly US$650 billion in market value.
The selloff has highlighted how difficult the environment has become for the group after their pandemic-driven boom. The blazing rally in e-commerce stocks at the height of Covid-19 lockdowns in 2020 has reversed as consumers returned to their pre-pandemic habits and inflation cooled their spending. Amazon executives said last week they were watching for whether shoppers will trim their purchases to offset rising prices as fuel and labour costs bite.
“The whole e-commerce group has been terrible, with growth slowing and stocks getting hurt,“ said Wayne Kaufman, chief market analyst at Phoenix Financial Services. “They’re obviously struggling post-pandemic, and there’s a question about how long it will be until growth trends reassert themselves. In the meanwhile, there’s still a tremendous amount of overvaluation in the sector.”
Among other e-commerce stocks, EBay Inc fell 6.7% after giving lackluster sales and profit outlooks for the second quarter with analysts pointing to macro headwinds, including the Ukraine war, surging inflating and weakening consumer confidence. Wayfair Inc plummeted 20% after its first-quarter adjusted loss per share was wider than analysts’ projections. Its chief executive officer Michael Fleisher also announced his retirement.
The Amplify Online Retail ETF is down 2.9% on Thursday, bringing its year-to-date decline to nearly 40%. To compare, the broader SPDR S&P Retail ETF is down about 20% this year.