Consumers Are Shifting Their Spending. E-Commerce Stocks Tumble.

Text size

Amazon.com
’s
earnings were a disappointment last month, and that now looks like the canary in the coal mine for e-commerce stocks, given reports from

eBay
,

Etsy
,

Shopify

and

Wayfair
.
Yet investors may be even more focused on their cautious forecasts.

Amazon (ticker: AMZN) delivered a first quarter that fell below expectations, and its second-quarter outlook was also light. Not surprisingly, the company called out factors like inflation and geopolitical uncertainty.

Now, smaller online retailers are seeing similar patterns, and none appear particularly upbeat about the near future. Of course, each of these e-commerce players is dealing with some company-specific factors, from an acquisition for

Shopify

to a chief financial officer departure at

Wayfair
.

Yet a more guarded outlook is a common theme among the companies, and one that investors are likely least happy to hear. Expectations weren’t high going into the quarter, given the Amazon results and overall concerns about consumer spending. E-commerce names in particular look vulnerable as people stocked up on goods during the pandemic, and are now shifting their inflation-reduced spending capacity to experiences like travel and dining out. Moreover, shoppers are also returning to stores more frequently.

Late Wednesday,

eBay

(EBAY) and

Etsy

(ETSY) both reported better-than-expected earnings and revenue that met expectations. However the bigger issue was their guidance.

EBay’s second-quarter outlook missed expectations and the company lowered its full-year forecast for both earnings per share and revenue, putting its forecast below consensus estimates. Likewise, Etsy’s second-quarter revenue outlook was also less than analysts are forecasting.

EBay is down 6.8% to $50.72 at recent check, while Etsy is falling 16.8% to $91.02.

Thursday morning didn’t hold much better news. Shopify (SHOP) is tumbling 15.4% to $410.62 as its top- and bottom-line results missed the mark. For the full fiscal year, the company expects revenue to be lower in the first half of the year, and highest in the fourth quarter. Loop Capital’s Anthony Chukumba reiterated a Hold rating on Shopify while lowering his price target to $460 from $660. His target reflects “the current shift in consumer demand from e-commerce back to bricks-and-mortar retailing…and waning investor sentiment on the technology sector.”

Likewise, Wayfair (W) is plunging 18.9% to $73.60. The company’s loss was wider than expected, while active customers and orders per customer decreased. Looking ahead, Wayfair said on its conference call that gross revenue on a quarter-to-date basis is down in the mid- to high-teens range on a year-over-year basis.

Landon Luxembourg, senior analyst at Third Bridge, notes that “the online furniture retail industry is entering a ‘new normal’ after a pull-forward in demand during the pandemic.” He added that “our experts say that inflation and supply chain woes will continue to be the major challenges facing Wayfair in 2022.”

It’s not surprising that these companies are offering more restrained forecasts, and executives highlighted these headwinds. Still, it’s a confirmation of investors’ fears about the sector, hence the big stock declines.

Write to Teresa Rivas at [email protected]