Please ensure Javascript is enabled for purposes of website accessibility

Why Newegg Commerce Is Falling Hard While the Market is Rising

By Rich Duprey - Jul 12, 2021 at 11:36AM

Key Points

  • Meme stocks are going to meme, and volatility is their specialty.
  • Newegg's business remains grounded, though, and is likely a buy at the right price.

Motley Fool Issues Rare “All In” Buy Alert

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The tech-oriented e-commerce specialist quickly shot to fame last week.

What happened

Shares of Newegg Commerce (NEGG 1.57%) had fallen more than 16% by noon on Monday, continuing the pullback from the highs that the online consumer-tech retailer reached last week as options trading became available on the recent IPO, but were in short supply.

So what

Newegg is a top online destination for computer components, consumer electronics, peripherals, and smart-home and gaming products. The company just went public via a reverse merger with a special purpose acquisition company, or SPAC. It seemed to garner meme stock status almost immediately, and it soared over 1,000% very quickly.

Woman wearing headset gesturing with hands at laptop

Image source: Getty Images.

Yet there was no fundamental basis for the run-up in its shares, and having them return to earth rather quickly is to be expected. Even so, the stock remains up 167% from where it started last week, but investors shouldn't be surprised to see it go lower still.

Now what

Newegg has a solid retail history and reputation, so this isn't some fly-by-night penny stock. The long-term growth story is likely just as solid, but not at any price, and investors should wait for Newegg's stock to return to more-reasonable and rational levels before they consider buying the online retailer.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Newegg Commerce, Inc. Stock Quote
Newegg Commerce, Inc.
NEGG
$3.89 (1.57%) $0.06

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/14/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.