5 stocks to avoid when e-commerce sales slow

Markets continue to falter under the weight of high inflation and the Federal Reserve’s aggressive monetary policy tightening. Billionaire Bill Gates has warned of an imminent threat economic downturn. And recent quarterly earnings releases from major players in the e-commerce industry have been disappointing. The bearish market sentiment surrounding e-commerce stocks is evident in Global X E-commerce ETFs (EBIZ) Down 21.2% over the past month.

According to Mastercard SpendingPulse, e-commerce transactions have decreased by 1.8% Year after year. Amid widespread apprehension of a further slowdown in e-commerce sales in the coming quarters, investors should be wary of overvalued e-commerce stocks.

Against this backdrop, we believe fundamentally weak and overvalued e-commerce stocks Etsy, Inc. (ETSY), eBay Inc. (EBAY), Shopify Inc. (STORE), Amazon.com, Inc. (AMZN), and Wayfair Inc. (O) are best avoided now.

Etsy, Inc. (ETSY)

ETSY in Brooklyn, NY operates two-way online marketplaces that connect buyers and sellers primarily in the United States, United Kingdom, Germany, Canada, Australia, France, and India. Its main market website connects artisans and entrepreneurs with various consumers.

ETSY’s revenue for the first quarter, ended March 31, 2022, was $579.27 million, up 5.2% year-over-year. However, its net profit was $86.11 million, down 40.1% year-on-year. Its non-GAAP adjusted EBITDA was $159.20 million, down 13.5% year-over-year. Additionally, its cash and cash equivalents were $756.24 million for the period ended March 31, 2022, compared to $780.20 million for the period ended December 31, 2021.

In terms of forward EV/S, ETSY’s 4.83x is 337.6% better than the industry average of 1.10x. Additionally, its forward P/S of 4.28x is 364.8% better than the industry average of 0.92x.

Analysts expect ETSY’s EPS to decline at a rate of 17.4% to $2.81 in 2022. Additionally, the stock price has fallen 66.6% over the past six past months to close yesterday’s session at $86.40.

ETSY has an overall D rating, which equates to Selling in our POWR Rankings system. Additionally, it has a D rating for Growth, Value, Stability, and Sentiment. POWR ratings rate stocks on 118 separate factors, each with its own weighting.

We also rated it for Momentum and Quality. Click on here to access all ETSY reviews. It is ranked No. 53 out of 72 stocks in the F rating the Internet industry.

eBay Inc. (EBAY)

EBAY operates marketplace platforms that connect buyers and sellers in the United States and internationally. The San Jose, Calif.-based company’s Marketplace platform includes its online marketplace at ebay.com and the eBay mobile app suite.

EBAY’s net revenue for the first quarter, ended March 31, 2022, was $2.48 billion, down 5.9% year-over-year. Its net loss was $1.34 billion, compared to net profit of $641 million a year ago. And its loss per share was $2.28, compared to EPS’s $0.92 in the year-ago period.

In terms of forward EV/S, EBAY’s 3.15x is 185.7% above the industry average of 1.10x. Plus, its 2.80x forward P/S is better than the industry average of 0.92x.

EBAY’s revenue is expected to decline at a rate of 5.5% to $9.84 billion in 2022. Over the past six months, the stock price is down 33.4% to close the session yesterday’s trading at $49.26.

EBAY’s POWR ratings reflect its poor outlook. The stock has a D rating for Sentiment.

We also rated it for growth, value, momentum, stability and quality. Click on here to access all EBAY reviews. It is ranked #22 in the the Internet industry.

Shopify Inc. (STORE)

Based in Ottawa, Canada, SHOP, a commerce company, provides a commerce platform and services in Canada, the United States, Europe, the Middle East, Africa, Asia-Pacific and Latin America. The Company’s platform allows merchants to view, manage, market and sell its products through various sales channels.

For the first quarter ended March 31, 2022, SHOP’s revenue increased 21.7% year-over-year to $1.20 billion. However, its net loss was $1.47 billion, compared to $1.26 billion in net profit the previous year. Its loss per share was $11.70, compared to EPS of $9.94 in the prior year period. The company’s cash and cash equivalents were $2.45 billion for the period ended March 31, 2022, compared to $2.50 billion for the period ended December 31, 2021.

In terms of forward EV/S, SHOP’s 7.11x is 153.4% ​​better than the industry average of 2.81x. Additionally, its forward P/S of 8.14x is 187.4% above the industry average of 2.83x.

SHOP’s EPS is expected to fall 51.8% to $3.9 in 2022. Over the past six months, the stock price has fallen 78.1% to close yesterday’s session at 340.04 $.

SHOP’s POWR ratings are consistent with this grim outlook. It has an overall F rating, which equates to a strong sell in our proprietary rating system. It also has an F rating for sentiment and a D rating for growth, value, stability and quality.

We also rated SHOP for Momentum. Click on here to access all SHOP reviews. It is ranked last of 33 F-rated stocks Internet Services industry.

Amazon.com, Inc. (AMZN)

AMZN is engaged in the retail sale of consumer and subscription products in North America and overseas. The Seattle, Washington-based company operates through three segments: North America; International; and Amazon Web Services (AWS). It sells merchandise and content purchased for resale from third-party sellers through physical and online stores.

AMZN’s net sales were $116.44 billion, up 7.3% year-over-year for the first quarter ended March 31, 2022. However, its net loss was rose to $3.84 billion from $8.11 billion in net profit a year ago. . Its loss per share was $7.56, compared to EPS of $15.79 for the prior period. Additionally, its total current assets were $133.88 billion for the period ended March 31, 2022, compared to $161.58 billion for the period ended December 31, 2021.

In terms of forward EV/S, AMZN’s 2.37x is 115.1% better than the industry 1.10x. Its advanced P/S of 2.22x is 141.1% better than the industry average of 0.92x.

AMZN’s EPS is expected to decline 75.9% to $15.64 in 2022. It has missed EPS estimates in two of the previous four quarters. The stock is down 39.2% over the past six months to close yesterday’s trading session at $2,175.78.

AMZN’s POWR ratings reflect its poor outlook. It has an overall D rating, which is equivalent to Sell in our POWR rating system. It has a D rating for growth and value.

Click on here to access additional POWR ratings for AMZN (Momentum, Stability, Sentiment, and Quality). AMZN is ranked #45 out of 72 internet industry stocks.

Wayfair Inc. (O)

W in Boston engages in e-commerce in the United States and internationally. The company supplies approximately thirty-three million products for the home sector under various brands.

On March 3, 2022, W entered into a strategic partnership with Capital One (COF) to offer a credit program to its Wayfair Professional members. However, the move may not generate windfall profits for the company in the short term, due to its recent lackluster financials.

W’s net revenue decreased 13.9% year-on-year to $2.99 ​​billion for its first quarter of fiscal 2022, ended March 31, 2022. Its net loss was $2.99 ​​billion. $319 million, compared to net income of $18 million in the prior year period. The company’s loss per share was $3.04, compared to EPS of 0.16 in the prior period.

W’s trailing twelve month P/CF of 937.45x is significantly above the industry average of 9.96x.

W’s revenue is expected to decline 3.8% to $13.18 billion in 2022. Its EPS is expected to fall 356.5% in 2022, and its EPS is expected to remain negative in 2022 and 2023 Additionally, it has missed EPS estimates in two of the last four. quarters. And over the past six months, the stock price is down 75.1% to close yesterday’s trading session at $62.35.

W has an overall F rating, which equates to a strong sell in our POWR rating system. It has an F rating for sentiment and a D rating for growth, momentum, sentiment and quality.

Click on here to check the additional dimensions for W (value). It is ranked #44 out of 45 stocks in the Specialized retailers industry.

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