Wayfair IPO on the floor of the New York Stock Exchange
Lucas Jackson | Reuters
Ecommerce stocks fell Friday after Amazon, the largest U.S. e-retailer, reported disappointing results and issued a weaker-than-expected outlook for the third quarter.
Wayfair and Etsy fell nearly 8% while eBay fell 7%. Amazon had its worst day on the market in more than a year, falling 7.6% and losing about $ 75 billion in market value.
Amazon said second-quarter sales growth slowed from 41% a year ago to 27% when the company received a boost from stay-at-home orders during the pandemic. Brian Olsavsky, Amazon’s chief financial officer, told analysts on the conference call that more vacations and social gatherings are on the horizon and there will be “things that people probably shied away from last year, and that’s all good.”
While Facebook and Apple issued similar warnings in their forecasts this week, Amazon was among the top five most valuable US tech companies if analysts’ sales estimates for the past quarter were missed. Profits exceed expectations, but investors tend to focus more on Amazon’s growth trajectory than its profitability.
During the pandemic, ecommerce companies across the board took off, benefiting from their growth rates and increasing their share prices. But after a year of oversized expansion, investors are poised for a slowdown in the second half of 2021.
The latest report from Amazon only added to these concerns.
Etsy, a marketplace for independent sellers and second-hand goods, is slated to report revenue next week. Sales growth has exceeded 100% for each of the past four quarters as consumers hit the site for face masks and other home items. According to StreetAccount, growth is expected to slow to 23% in the quarter that ended in June.
Even after Friday’s decline, Etsy stocks are still up 64% over the past year, putting them at the top of other major ecommerce companies, including Amazon, which is up 9%.
Furniture seller Wayfair is also due to announce its quarterly results next week. After four quarters of growth of over 40%, according to StreetAccount, sales are expected to decline by 8.4% in the second quarter. Wedbush analysts said in a note this week that the company, which also benefited from rising demand during the pandemic, has been hit by a combination of a return to in-store shopping, higher online advertising costs and supply chain restrictions.
Wedbush analysts still have the equivalent of a buy rating for the stock, but expect sales to decline 10% “as demand slows from peak levels.”
Ebay results are expected to be reached on August 11th. The business hasn’t seen as much of a boom as other online retailers in the past few quarters, in large part because it has lost market share to competing websites. According to StreetAccount, growth will slow to around 5% in the second quarter from 6.6% last year and 27% in the first quarter of this year.
Ebay has also been mining assets lately, selling StubHub for over $ 4 billion in 2019, and agreeing to sell its classified ads business last year in a deal that would raise $ 2.5 billion in cash. Last month, eBay announced that it was selling the majority of its South Korean operations for approximately $ 3 billion.
JMP analysts, who have the equivalent of a hold rating on the stock, wrote in a report that the various deals should help eBay focus on retaining customers and attracting sellers.
“We believe these transactions will create additional strategic options for eBay as it invests and develops new experiences around its core marketplace while maintaining its ROI strategy,” they wrote.
Ebay stocks are up 25% this year.
WATCH: Covid school closings forced this mother to quit her job. Now she sells on Etsy.