E-commerce is really looking weak
Our e-commerce theme basket is down 47% year-to-date being the worst performing basket. These companies were the biggest winners in terms of revenue and profit growth during the pandemic, and were rewarded by investors with aggressive equity valuations, but now many of these companies are paying back some of those gains. Earnings from many e-commerce companies including Amazon.com, Shopify, Zalando (published yesterday its first ever negative revenue growth figure), eBay, and related in payments from Block are all confirming that the consumer is hurting from elevated energy and food prices adjusting their behaviour and spending.
E-commerce are being hit hard by rising logistics and fulfillment costs, which recently are beginning to ease a bit, but Apple’s decision to allow users to not being tracked as driven by customer acquisition costs for e-commerce businesses that are relying on Facebook’s ad targeting tools. Depressingly low consumer confidence figures in Europe (see chart) are also not helping on consumer spending. The pain is massive in e-commerce and the future is likely not as bad as sentiment. We encourage investors to begin researching which e-commerce companies could become long-term winners and plan to get exposure when the market is finding a bottom. During the dot-com burst many of the subsequent winners such as Microsoft, Qualcomm, Amazon, and Intel were down a lot, and a similar pattern could repeat itself when the dust has settled.