Etsy, Wayfair and Shopify are rushing to earnings reports this week in the shadow of Amazon’s sell-off.
The historic rout in Amazon.com Inc. shares last week shows just how tough the environment has become for e-commerce stocks following their pandemic-driven boom, with investors poised for another rollercoaster ride in the next days.
Etsy Inc., Wayfair Inc. and Shopify Inc. rush to earnings reports this week in the shadow of Amazon’s worst sale since 2006. The tech giant sparked the rout with a higher revenue forecast. weaker than expected, adding to evidence of slowing e-commerce growth.
“It’s a canary in the coal mine,” said Oktay Kavrak, director and product strategist at Leverage Shares. “If Amazon encounters a speed bump, other names could crash. People were expecting slower growth following the pandemic, but I don’t think they were expecting a drop as drastic as what we have seen.
The flamboyant rally in e-commerce stocks seen at the height of the Covid-19 lockdowns in 2020 reversed as consumers returned to their pre-pandemic habits and inflation cooled their spending. Amazon executives said they were watching whether shoppers would cut back on purchases to offset rising prices as fuel and labor costs bite.
Etsy has fallen 58% this year, making it the third-worst performer in the S&P 500 index, while Wayfair has fallen 60%. Shopify just posted its worst month on record and it’s also the biggest loser on Canada’s S&P/TSX Composite Index this year. All of these stocks extended their declines on Monday.
Despite this relentless selling, dip buyers have been hard to find. It might have to do with their price. Shopify is trading at a whopping 128 times expected earnings over the next 12 months and Wayfair has a multiple of nearly 95, while Etsy’s figure is 21, suggesting they continue to be valued for rapid growth. That compares to around 17 on the S&P 500 and 21 for the Nasdaq 100.
However, analysts have lowered their expectations for the next quarterly results. Wayfair’s revenue is expected to fall about 15% this quarter, while Shopify’s expected 26% growth would be its weakest since at least 2014, according to data compiled by Bloomberg.
Etsy reports May 4, while Wayfair and Shopify are expected to release results May 5.
Shopify’s average revenue consensus has been reduced by around 9% over the past week, according to data compiled by Bloomberg. For Etsy, its average revenue projection has dropped 2.6% over the past month and nearly 30% over the past 90 days. Its revenue estimate fell more than 9% in the last quarter.
Despite the short-term risks, some remain optimistic about future growth. Poonam Goyal, senior retail analyst at Bloomberg Intelligence, has a positive view on the long-term outlook for e-commerce.
“We are very optimistic about e-commerce, which should be able to grow at a double-digit rate over the next few years,” she said in a telephone interview. “Comparisons will only get easier from here.”
Technical table of the day
Tech stocks could experience a prolonged sell-off. The Nasdaq 100 index, which fell more than 13% in April for its worst month since 2008, fell below what has been a key support line for the gauge. The tech-focused benchmark closed at 12,855 on Friday, just below the 13,000 level that had previously halted several selloffs, including in March this year and May 2021. Friday’s decline below this level may mean investors should pull back for more volatility. ahead.
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(Updates stock price movements.)
–With help from Matt Turner and Subrat Patnaik.