The coronavirus pandemic forced consumer behavior to evolve rapidly. Government-mandated closures of non-essential businesses, remote working, and remote learning were all major changes to how society did things.
The unprecedented changes created winners and losers among businesses. Those with a robust digital offering experienced surging customer and revenue growth. Among the winners were Chegg (CHGG 0.57%), Skillz (SKLZ -0.73%), and eBay (EBAY 1.02%). As economies are reopening, consumer behavior is changing again, and the aforementioned are experiencing slowing revenue growth.
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Chegg
Chegg is an education technology company that serves mostly college students. At the pandemic's onset, students were sent home for remote learning. Away from valuable on-campus resources, students look to Chegg for help with their college curriculum. As a result, revenue growth surged by over 50% for several quarters.
CHGG Revenue (Quarterly YoY Growth) data by YCharts.
Interestingly, Chegg's services are helpful for students, regardless of whether they are taking online or in-person courses. Still, when campuses started bringing students back to classrooms, revenue growth slowed significantly, culminating in an increase of just 2% in its most recent quarter, which ended March 31.
Skillz
Skillz is a unique gaming company. It allows players the opportunity to wager real money on the games played on its platform. Unsurprisingly, when billions of folks were cooped up at home during lockdowns, demand for in-home entertainment surged, and Skillz was a beneficiary.
SKLZ Revenue (Quarterly YoY Growth) data by YCharts.
However, with billions of doses of an effective vaccine administered worldwide, business restrictions have been removed in most parts of the world, and demand for in-home entertainment has declined. Skillz has found it harder to grow revenue despite aggressively investing in marketing. In its most recent quarter, which ended March 31, revenue grew by just 12%, far slower than the rates shown in the chart above.
eBay
eBay needs no introduction. The popular auction and e-commerce site thrived as folks looked to avoid shopping in person. In its quarter that ended in March of 2021, revenue exploded by 42%, surpassing $3 billion in a quarter for the first time in years.
Like the others mentioned earlier, eBays' revenue slowed as economies reopened and consumer behavior resembled closer to pre-pandemic habits. In its most recent quarter, which ended March 31, eBay's revenue decreased by 6%.
A final word
Of course, these businesses did not expect the pandemic-infused surging revenue to sustain long term. That said, it appears as though investors were caught off-guard by the slowdown. Each of these three stocks has experienced considerable decreases over the last year. Admittedly, there are other factors at play here, including the Federal Reserve tightening monetary policy. But economic reopening is certainly partly to blame.
Investors should keep an eye on these businesses and how changing consumer behavior affects them over the next several quarters. The key question to keep in mind as you observe this is whether they are emerging from the pandemic stronger than they entered. If so, the sell-off could be an opportunity.
