Is the E-commerce Industry in Crisis?

Is the E-commerce Industry in Crisis?

Online retailers have grown phenomenally over the past two years, but with growth now slowing down, is it time for investors to move on?

If the pandemic taught us one thing, it’s that e-commerce is the future. Scrolling through virtual department stores on your phone before clicking ‘buy’ from the comfort of your couch got many of us through some dark days.

But the world is now reopening, and there are some questions about the future of retail.

The end of online retail?

First Amazon (NASDAQ: AMZN), then Shopify (NYSE: SHOP), now eBay (NASDAQ: EBAY) — all of these companies have reported earnings that saw them exceed expectations for EPS and revenue. However, they each also gave bleak outlooks for the coming quarter. A slow-down in online retail is anticipated as we emerge from the pandemic, and these stocks are going to take the brunt of the damage.

Shopify plummeted by 16% following its report, and eBay is currently down 10% pre-market. Investors are panicking because these once skyward stocks are slowing down. Fret not, however, as this was bound to happen.

E-commerce stocks experienced a growth explosion over the last two years that was as impressive as it was unsustainable. Shopify grew by over 400% in two years — that’s just not normal!

Now, various factors are conspiring to drag these stocks back to earth. Inflation concerns, a reopening economy, supply chain issues, and a rotation away from growth stocks have sent these companies far from their all-time highs. What hasn’t changed, however, is the underlying theses behind these businesses.

Shopify still has room to expand, is consistently adding new partners, and boasts strong financials. eBay is still synonymous with online shopping and has seen advertising revenue pass the $1 billion mark only last year. And Amazon — well, with a market cap approaching $1.5 trillion, let’s just say it’s doing okay. 

Don’t let short-term fear and panic corrode your long-term horizon. E-commerce isn’t going anywhere. In fact, it’s just getting started.

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