E-commerce platforms got a big boost from the COVID-19 pandemic. The public health crisis triggered the rapid digitization of commerce and trade. Nationwide shutdowns forced people to stay home and rely on online platforms for their shopping needs…
However, rapid progress on the vaccination front around the globe has led to much subdued performance by the online commerce sector so far this year. There are also rising fears of a post-pandemic slowdown of the e-commerce industry.
This, combined with investors’ rotation to cyclical stocks amid the economic recovery, could drive a greater pullback by fundamentally weak e-commerce stocks. Analysts have recently downgraded eBay Inc. (EBAY – Get Rating) and Etsy, Inc. (ETSY – Get Rating) given their bleak growth prospects. So, we think it could be wise to avoid these stocks now.
EBAY is a global commerce leader that operates an online marketplace platform that connects buyers and sellers in more than 190 countries worldwide. Founded in 1995, the EBAY platform enables users to list, buy, sell, and pay for items and facilitate payments on behalf of users, merchants, retailers, and brands.
Shares of EBAY lost 10% intraday on April 29, after two investment firms downgraded the stock. Susquehanna has lowered its r rating, noting that “at this point, with tough comps, the recovery, and increasing investments, we see the risk/reward as balanced for the stock and are moving to Neutral.” Analysts at Wedbush lowered the price target also amid its lower gross merchandise volume (GMV) outlook. Wedbush also suspects the coming four quarters could potentially deliver negative year-over-year GMV growth. Analysts at Stifel and Barclays have also recently cut their price expectations of EBAY.
In the first quarter, ended March 31, EBAY generated $3 billion in revenues, surging 42% year-over-year. Its GMV increased 29% year-over-year to $27.5 billion, leading to its highest revenue growth since 2005. The company continued to scale its management of payments globally, with more than 52% of global on-platform volume processed through managed payments during the quarter. Notably, its annual active buyers during the quarter grew 7%, with the total now 187 million. Its non-GAAP EPS came in at $1.09, rising 59% year-over-year.
EBAY closed a fantastic 2020 that witnessed volume growth that was more than its prior seven fiscal years combined. As a result, the stock has returned 43.6% over the past year. However, EBAY’s management has recently raised concerns that the people’s mobility has now improved in most of its markets and that fewer people might turn to digital stores. Consequently, it has issued a conservative outlook for the current year and expects its EPS to lie in the $0.91 to $0.96 range in the second quarter. In fact, Wall Street analysts expect its EPS for the current quarter to decline 6.9% year-over-year.
EBAY’s POWR Ratings reflect a bleak outlook. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an overall C rating, which translates to Neutral in our proprietary rating system. EBAY has a D grade for Sentiment, and a grade of C for Growth and Stability. It is ranked #9 of 71 stocks in the F-rated Internet industry.
In total, we rate EBAY on eight different levels. To see additional POWR Ratings for Value, Momentum and Quality, click here.
ETSY operates two-sided online marketplaces that connect millions of buyers and sellers around the world. Its primary marketplace, Etsy.com, is the global destination of more than 66 million unique handcrafted and creative goods. It also provides various seller services, including Etsy Payments, Etsy Ads, and Etsy Shipping Labels.
Analysts at KeyBanc lowered ETSY last week to a “Sector Weight” rating from “Overweight”, citing…
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