Shares in Newegg (NASDAQ:NEGG) dropped nearly 4% to start off the week. That officially puts an end to the latest rally for NEGG stock, which had popped 22% on Aug. 5. At its current price of $17.69, NEGG is down more than 75% from the height of its surge in early July. However, it still remains up 305% from the start of the year.
If you have kids who will be going to school this fall — K12 or college — you probably have a big expenditure coming up. With Covid-19 still making remote or hybrid learning a distinct possibility, laptops are on many parents’ back-to-school shopping lists. That is good news for retailers like Newegg, which specializes in computers and computer accessories.
The rush to snap up laptops is going to be good news for NEGG stock as well.
Back to School Is a Strong Season for PC Sales
Fall is traditionally a strong season for computer sales. They tend to fall off through the summer, but ramp up as students prepare for school. The race to capture that student spending is why you’ll see many computer makers offer special student promotions.
This potential catalyst is even more enticing now because this year, consumers are in a spending mood.
Last year, the pandemic resulted in many students being forced to stay home and connect to classrooms virtually. Doing so meant they had to have a PC. The preferred form factor was a laptop, which is portable, doesn’t require a big monitor, and is compact enough that it can be set up anywhere in the home where there’s a bit of free space.
The demand for laptops made popular models tough to find last year. Supply chain disruptions and a growing chip shortages didn’t help. Despite the challenges, parents still shelled out big bucks. Last July, parents of elementary and high school students said they would be spending an average of $789.49 per family on back-to-school shopping. Those with college-age kids were shelling out $1,059.20 per family. A third of those families said they were investing in a new laptop.
PC manufacturers cashed in last year. Between remote learning and working from home, in 2020 PC sales achieved their highest yearly growth in a decade.
This year, that spending is continuing to rise, and it’s tilting even more strongly toward laptop purchases.
Hybrid and remote learning looks to be a reality again for many students. In addition, the federal government has expanded its child tax credit, giving families more money to spend. Among parents who responded to a survey by the National Retail Federation, 49% plan to buy a laptop this fall.
Bottom Line on NEGG Stock
Many employees found themselves working from home during the pandemic. While companies are re-opening their offices, many are adopting a hybrid work model, with employees splitting their time between home and the office. This will continue to boost PC sales, as it did in 2020.
In a previous post about Newegg, I explained the challenge with NEGG being a meme stock. There’s no avoiding the fact that it can be volatile as a result. That 22% gain on Aug. 5 was nothing. In July, NEGG stock recorded a single-day gain of 148%. Those spectacular gains — for no real reason — are accompanied by dramatic drops.
However, as I pointed out, unlike many meme stocks, Newegg is a viable company with decades of history and many repeat customers. NEGG stock (which earns an “A” rating in Portfolio Grader) is hardly a gamble, so long as you aren’t buying shares with the expectation of selling when the next big spike comes.
That big spike might never come. But with consumer spending on laptops ramping up through the late summer and fall, Newegg is going to see a corresponding revenue increase as well. While that will ultimately help to stabilize NEGG again, it’s a reminder that investors need to look at this company as a long-term growth investment. Look at the bigger industry and consumer trends instead of focusing on the exaggerated movements triggered by retail investors.
When you look at it through that lens, NEGG stock is an attractive option as a proven e-commerce company that is especially loved by PC and computer accessory shoppers.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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