Why MercadoLibre, Sea Limited, and Chewy Shares Keep Adding
It’s Tuesday and e-commerce stocks are plummeting again. For the second consecutive day, the actions of Free Mercado (NASDAQ: MELI), Argentinian eBay, Limited sea (NYSE: SE), its Singaporean counterpart, and soft (NYSE: CHWY) – a slightly more focused ecommerce game aimed at pet owners – are down 5.4%, 4.4% and 5.8% respectively – and apparently, on no relevant news.
Well no no news, exactly. While there is a dearth of the usual suspects today – no downgrading analysts or lowering price targets, no bad earnings reports, or prior announcements of earnings – trade stocks electronics continue to suffer the adverse effects of Pfizerannounced yesterday that its coronavirus vaccine candidate is 90% effective.
But isn’t that good news? Well, in a sane world, sure. The potential for Pfizer to have a safe and effective vaccine against COVID-19 promises to free consumers from their homes around the world and enable them to join the global economy, to venture out, to eat out, to see entertainment in a crowd and to shop with abandon (and in person).
The problem is, this isn’t necessarily good news for companies that do most of their business online.
It’s largely because of the coronavirus-related closures (and the stay-at-home orders they spawned) that Chewy’s sales grew 47% from last year, while the business of MercadoLibre grew 61% and Sea Limited literally doubled in size – sales were up 102% year over year, in fact.
Now investors are starting to wonder: if Pfizer’s vaccine is as good as advertised, will consumers continue to order online and have their purchases delivered right to their doorstep once that is no longer the only option? Or will they ditch the ease of e-commerce and want to start shopping in person again?
Personally, I think the answer to this question is obvious: shopping online is easier, and easy is good.
The market share increases and sales gains made by these companies during the crisis are not going to go away any time soon. This does not necessarily mean, of course, that the MercadoLibre stock is a good deal at 2,900 times earnings. It also doesn’t mean that you should feel completely confident buying Sea Limited or Chewy, not with these two companies still mired in red ink and losing money on every sale they make.
But it does suggest the possibility that investors, who scrapped their shares in Chewy, MercadoLibre, and Sea Limited yesterday, and are doing so again today, might see the future badly and act impulsively because of it.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.