What happened
Newegg Commerce (NASDAQ: NEGG) stock underperformed a rising market this week. The e-commerce specialist's stock had fallen 18% through Thursday trading, according to data provided by S&P Global Market Intelligence, even as the wider market jumped 2%. That move added to big short-term losses for shares, which are down 70% so far in 2022.
The slump was sparked by growing selling pressure by investors and some insider owners.
So what
Wall Street is still digesting Newegg's updated sales and earnings outlook that arrived as part of management's operating report on Sept. 2. That announcement showed slowing demand trends, falling profit margins, and ballooning net losses for the current quarter that ends in late September.
Business trends are being hurt by a shift away from many of the merchandise niches that were popular in earlier phases of the pandemic. "Our performance was affected by several factors that were out of our control including macro-economic conditions, higher inflation, and a weak sales environment," CEO Anthony Chow said in a press release.
Newegg stock might also be under pressure from insider trading. The company has lifted some trading restrictions for employees and other insiders for the period running from Sept. 6 through Sept. 23., with millions of otherwise restricted shares now open for trading.
Now what
Investors can likely expect continued pressure on Newegg stock, at least until the current growth hangover passes. Wall Street isn't thrilled to see weakening sales trends and falling profitability. Shareholders are even less excited about the prospect for net losses through the rest of 2022.
Newegg is trying to limit those losses through cost cuts. It is also planning an aggressive promotion around Black Friday this year. But the stock might not recover significant ground until it becomes clear that demand trends have stabilized and Newegg has worked through its oversupply of inventory. As a result, investors might want to look toward more established tech stocks for their watch lists.
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Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
