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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.

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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.

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Stocks Mentioned

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

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