Seeing recent gains from its meme stock status, this company has a few tricks up its sleeve for profitability; is Newegg a good investment?
Aug. 2, 2021
Computer and electronics e-commerce retailer Newegg (NASDAQ: NEGG) has seen a lot of volatility in its stock price recently thanks to its entry into the meme-stock world. Up nearly 50% since going public, it reached its highest price ever three weeks ago of over $67, a substantial increase of over 400% since the same time. Speaking of going public, it has only been two months and that is no doubt contributing further to its stock price instability; so, is Newegg a good investment right now?
The bull case for Newegg
There is little doubt that Amazon is the place people go for anything and everything. However, the e-commerce giant doesn't always have what you might need; for specific computer components and hardware, consumers gravitate to Newegg. For example, four hard-to-find NVIDIA graphic brands that are in high demand for gaming and cryptocurrency mining are available from the e-tailer. Of its 36 million registered users, 4.7 million have made at least one purchase in the last year allowing the company to post a net revenue of $2.1 billion for fiscal 2020, a 38% increase from the year prior.
In addition to consumer sales, Newegg also has over 600,000 business clients spanning sectors like healthcare, education, and government; furthermore, the company has a marketplace where third-party retailers can sell their wares for a commission. Recently, Newegg enhanced its PC Builder Platform by offering a PC Builder Assembly Service from ENIAC, absolute professionals in the field, who build and run a series of quality tests on your new unit, which is available at varying price points.
The company has seven warehouses in North America and one in China. The placement of the warehouses assures that 95% of the North American population can receive packages within two days, scoring points for customer satisfaction and bolstering customer loyalty. It's innovations like these that has the company projecting a 7.1% increase in revenue for fiscal 2021. Additional points for Newegg go to its in-house label, Rosewill, which sells its products on major e-commerce sites like Amazon, eBay, and Walmart.
The bear case for Newegg
Newegg exists in the meme realm and that makes timing a purchase very uncertain. Moreover, there has yet to be a quarterly report to reinforce investor confidence. The company's stock has a p/e ratio of 41.4x compared to the industry average of 28.2x and the overall market's 18.3x so it's safe to say it's overvalued. And again, being such a young stock, it has yet to finish shaking off its growing pains.
So, is Newegg a good investment?
Yes. The question is when? I'd wait until Newegg publishes its first quarterly report at the end of September and act accordingly. A company that claims to have been profitable since inception and holds 8th place among online retailers with a niche market and loyal customer base deserve a place in any long-term portfolio.
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Quickfire round:
1. Where is Newegg's headquarters?
City of Industry, California
2. When was Newegg founded and who is its CEO?
2001; Fred Chang since August 2010
3. When did Newegg go public?
May 20, 2021 via a SPAC reverse merger with Lianluo Smart Ltd.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
