There was some individual company news yesterday and today, but the positive day more likely had to do with a broader rally in the markets, especially beaten-down technology stocks that were among the first to get sold off since last November.
Yesterday, YouTube announced a partnership with Shopify, whereby content creators on YouTube can seamlessly integrate e-commerce into their channels. The thinking here is that online creators are gaining greater influence over customer buy decisions when it comes to fashion; therefore, eliminating friction between seeing a YouTube video and buying the discussed item is a huge opportunity. Given that Shopify's platform can help influencers sell directly to consumers while offering inventory management and payments solutions, the tie-up seems like it makes a lot of sense. And given that YouTube is the biggest online video platform in the world, the new tie-up could be a boon to Shopify.
Then today, Etsy named Kruti Patel Goyal as CEO of its Depop subsidiary, a fashion resale platform it bought last year for $1.62 billion. She will be replacing Maria Raga, who is resigning to "pursue personal ventures." Goyal was Etsy's chief product officer prior to the new promotion and will be replaced by Nick Daniel, who was previously vice president of product management. Still, this isn't necessarily good news, to see the current head of the subsidiary leaving, and is likely not the reason for the increase in Etsy's stock price today.
Finally, there wasn't any material news out of MercadoLibre.
Again, it was likely a broader rally in technology stocks that propelled these e-commerce stocks higher. The market appears to be sniffing out a bottom after the worst first half to a year since 1970, at least in the near term. The downturn was led by technology stocks, especially e-commerce, as the pandemic-era boom in e-commerce reversed course amid soaring inflation, rising interest rates, and a bad hangover from the prior-year surge in goods purchased online. As you can see, even after today's big rally, Shopify, MercadoLibre, and Etsy are down between 65% and 82% from all-time highs set last year.
Have the last few days marked a decisive turnaround in these stocks, or is this just a dead cat bounce? This is very difficult to say with any certainty; however, e-commerce is projected to take a greater and greater share of retail sales in the coming years.
According to the U.S. Census, U.S. e-commerce sales as a percentage of retail sales peaked in early 2020 on an adjusted basis, and has been falling ever since into the low 14% range as the pandemic waned. However, the long-term trend still appears to be up, and e-commerce penetration is now right about back to the pre-pandemic upward-sloping trendline.
Therefore, this bounce could be the sign of a bottom. Still, investors should still be aware that we could be headed for a recession, given the Federal Reserve's task of arresting soaring inflation at all costs. Yet for those interested in these stocks generally, now is a good time to increase your research, and to perhaps construct a discounted cash flow model to get a sense of intrinsic value. Remember, just because a stock is down a lot doesn't mean it's cheap. However, beaten-up stocks down more than 60% -- especially leaders in their respective fields -- are certainly good places to look. And given that a mild recession seems to have already been discounted by the markets, these stocks are probably closer to the bottom than they are to the top.