The slowdown in pandemic online ordering is pushing Amazon to miss on quarterly estimates: Dan Morgan
The historic rout in Amazon.com Inc.’s shares last week highlights how difficult the environment has become for e-commerce stocks after their pandemic-driven boom, with investors set for another rollercoaster in coming days.
Etsy Inc., Wayfair Inc. and Shopify Inc. are hurtling toward earnings reports this week in the shadow of Amazon’s worst selloff since 2006. The tech giant triggered the rout with a weaker-than-expected revenue forecast, adding to evidence of slowing e-commerce growth.
“It’s a canary in the coal mine,” said Oktay Kavrak, a director and product strategist at Leverage Shares. “If Amazon is hitting a speed bump, other names could crash. People were expecting a slowdown in growth following the pandemic, but I don’t think they expected as drastic a drop as we saw.”
The blazing rally e-commerce stocks saw 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 they were watching for whether shoppers will trim their purchases to offset rising prices as fuel and labor costs bite.
Etsy has slumped 57 per cent this year, making it the third-worst performer on the S&P 500 Index, while Wayfair has tumbled 60 per cent. Shopify just posted its worst month on record -- it’s the biggest loser on Canada’s S&P/TSX Composite Index this year, wiping out more than US$151 billion in market value.
Despite that relentless selloff, dip buyers have been hard to come by. That might have to do with how expensive they still are. Shopify is trading on a whopping 129 times projected profits over the next 12 months and Wayfair has a multiple near 95, while Etsy’s figure is 22 -- suggesting they continue to be priced for rapid growth. That compares with about 17 on the S&P 500 and 22 for the Nasdaq 100.
However, analysts have been paring back their expectations for the upcoming quarterly results. Wayfair’s revenue was projected to fall about 15 per cent this quarter, while the 26 per cent growth expected at Shopify would be its lowest since at least 2014, according to data compiled by Bloomberg.
Etsy reports on May 4, while Wayfair and Shopify are slated to release results on May 5.
The average consensus for Shopify’s earnings has been reduced about 9 per cent over the past week, according to data compiled by Bloomberg. For Etsy, its average earnings projection has dropped by 2.6 per cent over the past month and is down almost 30 per cent over the past 90 days. Its revenue estimate has declined by more than 9 per cent over the past quarter.
Despite near-term risks, some are staying upbeat when it comes to future growth. Poonam Goyal, a senior retail analyst at Bloomberg Intelligence, has a positive view on the long-term prospects for e-commerce.
“We’re very bullish on e-commerce, which should be able to grow at a double-digit clip for the next several years,” she said in a phone interview. “Comparisons will only get easier from here.”
Tech stocks may be in for a prolonged selloff. The Nasdaq 100 Index, which sank more than 13 per cent in April for its worst month since 2008, has fallen below what has been a key support line for the gauge. The tech-heavy benchmark closed at 12,855 on Friday just below the 13,000 level which has previously acted to halt multiple selloffs, including in March of this year and in May 2021. Friday’s decline to below that level may mean investors should hunker down for more volatility ahead.
Top tech stories:
- India accused Xiaomi Corp. of breaching the country’s foreign-exchange laws and seized 55.51 billion rupees (US$726 million) from a local unit of the smartphone maker. It’s the nation’s latest clash with a Chinese company over their activities in the market.
- The Solana blockchain is recovering after going dark in a seven-hour outage, caused by a significant rush of bots trying to mint nonfungible tokens on the crypto network.
- Warren Buffett snapped up more Activision Blizzard Inc. stock in a merger arbitrage bet, as Microsoft Corp. pursues its deal to buy the video-game maker in what would be one of the largest mergers in U.S. history.
- Yuga Labs, the creator of the popular Bored Apes Yacht Club collection of NFTs, launched a sale of virtual land related to its highly anticipated metaverse project, raising about US$320 million worth of cryptocurrency in the largest offering of its kind.