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Online retail stocks underperform the broader market in October

November 9, 2016 09:30 AM
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E-commerce stocks didn’t fare well in October, as some retailers and vendors fell short on third quarter earnings expectations.

The Internet Retailer Online Retail Index declined 6.5% in October, putting the index of 25 e-commerce stocks up 6.8% for the year. By comparison, the Dow Jones Industrial Average declined 0.6% last month and is ahead 5.8% for the year, the Standard & Poor’s 500 index is ahead 5.6% for the year after declining 1.6% last month and the Nasdaq is up 5.8% for the first 10 months of the year after losing 2.1% in October.

The Internet Retailer Online Retail Stock Index tracks 25 publicly traded e-retailers and technology providers that generate a large portion of their business from online retailers. The aim is to provide a snapshot of how publicly traded companies dependent on online retail sales fared against the broader market—an indication of how investors are viewing the health of the e-commerce industry.

The Online Retail Index is equal weighted, which means the percentage of variation of every stock has the same impact on the index. That way, the index reflects the ups and downs in the stocks of smaller companies as well as those of e-commerce giants like Amazon.com Inc., No. 1 in the Internet Retailer 2016 Top 500 Guide, and online marketplace eBay Inc. It also ensures that a big swing in one stock doesn’t dramatically impact the index.

Of the 25 stocks in the Online Retail Index, seven companies’ stock prices rose, while 18 companies declined in value. For the year, 16 gained in value and nine decreased. 

Shareholders of Akamai Technologies were the biggest winners in October, as the stock rose 29.3% during the month. The e-commerce vendor’s stock jumped nearly 15% in one day after it reported better-than-expected third quarter earnings Oct. 25. In the third quarter, Akamai’s revenue grew 6.0% year over year.

Meanwhile, investors had negative reactions to Amazon’s third quarter earnings. After the e-retail giant reported, Amazon’s stock fell 5.1%.

“Amazon reported Q3 revenues above consensus expectations with strength across the board, but with lower operating/net income, as margin expansion will likely remain lumpy given the pace of investment across multiple growth areas in retail, technology and media,” Colin Sebastian, e-commerce stock analyst at Robert W. Baird & Co., wrote in a note to investors after the earnings report. “Importantly, Wall Street estimates should now reflect more reasonable expectations going forward.”

The 25 companies Internet Retailer tracks in its Online Retail Index are 1-800-Flowers.com Inc. (No. 57 in the Top 500), Amazon.com, Akamai Technologies, BazaarVoice, Blue Nile Inc. (No. 82), CafePress.com (No. 249), ChannelAdvisor Corp., eBay Inc., Etsy Inc. (No. 23), FTD Cos. (No. 116), Groupon Inc. (No. 26), LivePerson Inc., Manhattan Associates, Overstock Inc. (No. 29), PC Connection Inc. (No. 51), PetMed Express Inc. (No. 179), PFSWeb Inc., QVC Group (No. 10), Shopify, Shutterfly Inc. (No. 46), Stamps.com (No. 156), U.S. Auto Parts Network (No. 128), Vistaprint Ltd. (Cimpress, No. 31), Wayfair Inc. (No. 24) and Zendesk.

 

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