The e-commerce sector that has been slammed by a recent sell-off is dealing with yet more negative news on Monday morning.
In an internet retail earnings preview provided by a team of analysts led by Scott Devitt, Stifel offered lowered expectations across numerous stocks. Among the prominent stocks profiled, price targets for Wayfair, Inc. (W), Shopify (NYSE: SHOP), Etsy, Inc. (ETSY), Sea Limited (SE), and The RealReal (REAL) were all reeled in.
“ECommerce is giving back some of the transitory gains that were driven by less human mobility and a short-term spend shift to goods over services, which is now reversing,” Devitt explained. “Emerging inflation and the effects on overall discretionary consumer spending are also a consideration.”
While he explained that the longer-term trends could remain promising as comps normalize from historic levels and inflation trends potentially peak, a recovery from current levels to new highs should take a period of years. As a result, near term trends were cited as exceptionally inauspicious and motivated tempered price targets. Further, $ 1,400 stimulus checks issued in March of 2021 are set to skew earnings comps and potentially adversely impact the slew of upcoming earnings results.
On a stock-specific level, Etsy (ETSY) is expected to be hit by changing consumer habits in discretionary spending, uncertainty about inflation, and protests over the company’s seller transaction fee that continue to hang over the stock. Devitt therefore cut his price target to $ 160 from $ 200, but maintained a Buy rating on shares.
The very same macro uncertainty stemming from both inflation and supply chain problems as well as changes in shopping trends were cited as key data points prompting a price target cut for The RealReal (REAL) and Wayfair (W). Devitt trimmed his target on RealReal (REAL) from $ 11 to $ 9 and cut his price target on Wayfair (W) from $ 130 to $ 110 per share. Both shares were assigned Hold ratings ahead of their early May earnings releases.
For Shopify, Devitt was particularly cautious not only on the macro headwinds, but a market share race with Amazon (AMZN).
“We are cautious on 1Q results and 2Q guidance heading into the report given signs of a weakening macro environment and rising inflation, which may be more severely felt by Shopify merchants versus Amazon given the more discretionary nature of the product mix,” he wrote in the preview note.
He noted that Amazon’s (AMZN) recent introduction of Buy with Prime, a new service that allows third-party merchants to utilize its fulfillment and logistics network, poses a serious threat to Shopify (SHOP). Devitt cut his price target on shares to $ 800 from $ 1000, while maintaining a Buy rating. The price target still represents a significant premium to the present share price after a severe sell-off in recent weeks.
Finally, Devitt denoted lessened enthusiasm for Singapore-based online retailer Sea Limited (SE). He pointed to restrictions on product offerings put in place by the Indian government and growing pains in expansion into Europe remain problematic to the upcoming earnings setup. While Devitt lowered his price target from $ 200to $ 160, he maintained a Buy rating on shares given the still-healthy opportunity ahead.
Shares of each of the online retailers to see price targets slashed by Devitt’s team declined in pre-market trading on Monday.
Elsewhere, the Stifel team reiterated Buy ratings on Amazon (AMZN), eBay (EBAY), and MercadoLibre (MELI) and Hold ratings on Poshmark (POSH) and Jumia Technologies AG (JMIA).
Read more on the recent share price erosion among eCommerce stocks.