It was a bloody day for the stock market. The Nasdaq fell by more than 1,000 points as traders reacted to the Fed’s rate hike. As a result, all manner of growth and tech stocks were in the red on Thursday following the news, with one sector that suffered especially big losses was eCommerce. Some of the largest online retailers saw their stock prices crash by double-digit percentage margins.
Although the broader selloff in the markets was one reason why this happened, the other major catalyst had to do with a series of earnings misses. Companies like eBay (NASDAQ: EBAY) and Etsy (NASDAQ: ETSY) both fell by double-digit margins when both reported Q1 earnings significantly lower than expected. Both companies cited macroeconomic uncertainty as to the main reason their earnings fell short.
eBay had originally predicted revenue for the current quarter would come in around $2.3 billion, already below the $2.5 billion expected by Wall Street. Likewise, Etsy predicted that sales would come in at around $550 million, whereas analysts were hoping for at least $627 million for Q1 2022.
Additionally, two other online retailers reported earnings that also disappointed Wall Street. Wayfair (NASDAQ: W) and Shopify (SHOP). Wayfair posted a bigger than expected loss for Q1, with revenues sliding 13.9% from last year. Losses per share had widened to $1.96, much more than the $1.54 loss per share originally anticipated.
Shopify fared even worse. The company reported the slowest revenue growth since going public in 2015, as well as a massive miss on profits. Management also announced that it would make a $2.1 billion acquisition of U.S. logistics firm Deliverr, although the details remain scant. Similar to other eCommerce stocks on Thursday, Shopify was quick to receive heavy scrutiny from analysts.
“Investors we speak with are increasingly frustrated with limited/cryptic guidance, reduced disclosure and, in the current environment, ramping spend ahead of a possible recession,” said Barclays analyst Trevor Young, who lowered his target price from $900 to just $460.
Every single one of these companies was well in the red on Thursday. eBay was down 11.7%, Etsy fell over 16.8%, Wayfair crashed by a startling 25.7%, and Shopify tumbled by around 14.3%.
The results were so bad that even the world’s largest retailer wasn’t immune from this crash. Shares of Amazon (NASDAQ: AMZN) also ended up falling over 8%, losing around $200 billion in market cap for shareholders.
In any other market, these earnings results might not have caused such a steep selloff. However, given how anxious investors are right now with growth stocks, we’re seeing significantly more volatile reactions from traders at even the slightest sign of financial weakness. Given that more interest rate hikes are likely to come in the future, this general attitude of growth-skepticism amongst investors likely isn’t going to change anytime soon.
eBay Company Profile
With $95 billion in gross merchandise volume transacted in 2018, eBay’s Marketplace facilitated nearly 4% of the $2.6 trillion global online commerce market. EBay’s strategic priorities include revitalizing its Marketplace platform by emphasizing its unique product assortment and value proposition, improving the seller and buyer experience, utilizing structured data/artificial intelligence for listing searches, promoted listing advertising, and improving its mobile commerce capabilities. EBay partnered with Netherlands-based Adyen for payment intermediation beginning in 2018. – Warrior Trading News
