Avoid These Two Recently Downgraded E-commerce Stocks

Ebay, Brand, Website, Logo, Online Shopping, Auction

The e-commerce market soared last year as nationwide lockdowns and the fear of contracting coronavirus kept shoppers indoors. However, now that the economy is reopening on the back of accelerating vaccine rollouts, online platforms are seeing reduced traffic. This, along with investors’ rotation away from pandemic winners and toward cyclical stocks, could drive a further retreat by the weaker e-commerce players. As such, analysts have recently downgraded eBay Inc. (EBAY) and Etsy, Inc. (ETSY) because their near-term prospects look bleak.

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. and Etsy, Inc. given their bleak growth prospects. So, we think it could be wise to avoid these stocks now.

eBay Inc. 

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.

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