It’s getting ugly out there. Right now, the market looks broken. Indeed, in the world of high-growth tech stocks, there’s little green to be found. For investors in eBay (NASDAQ:EBAY) and EBAY stock at least, this is certainly the case.
Today, EBAY stock has plunged by more than 10% so far, in sympathy with other e-commerce retailers. And the scary thing is, eBay was actually one of the better performers among the companies that reported earnings.
It’s earnings season and investors are scouring results for any indication of what the future may hold in terms of growth. E-commerce companies have also, for quite some time, rode the coattails of strong secular trends and rock-bottom interest rates. However, that environment appears to be changing.
Yesterday, Federal Reserve Chairman Jerome Powell announced the first hike of 50 basis points (bps) in more than two decades. The market rallied on the news. This was also due to comments that the Fed would not consider future 75 bps hikes, at least near-term. Now the market appears to be reassessing its view on rising interest rates, however — at least when it comes to e-commerce stocks.
Let’s dive more into why investors are growing bearish on eBay.
Why Is EBAY Stock Tumbling Today?
As mentioned, earnings season provides investors with the ability to put forward their own forecasts for the future performance of a given sector. Yesterday, eBay reported quarterly earnings. Much to the chagrin of investors, the report missed the mark.
It wasn’t the numbers that missed the mark, though. In fact, eBay reported revenue in line with earnings and a bottom-line beat. However, the company’s forward guidance put investors on edge; eBay noted that investors should expect slowing growth, something echoed by other e-commerce juggernauts in recent reports.
With Amazon (NASDAQ:AMZN), Etsy (NASDAQ:ETSY), Shopify (NYSE:SHOP) and Wafyair (NYSE:W) all reporting earnings recently, investors have gotten a pretty clear picture of where the e-commerce sector is headed. In short, it doesn’t look good.
The reopening of physical retail is crimping growth. The base effects from last year’s record numbers don’t help, either. And then there’s the yield curve inversion and skyrocketing interest rate environment, which suggests a recession could be on the way. For high-growth e-commerce stocks, these are all bearish catalysts.
Perhaps there’s argument that these stocks are getting unfairly beaten up. However, in this environment, the bears are winning out. Accordingly, it may be a rough ride for EBAY stock in the coming quarters, should the current macroenvironment continue.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
