E-commerce stocks sink after first-quarter earnings results from Shopify, Etsy, and eBay underwhelm investors

• E-commerce stocks plunged on Thursday after earnings results from Shopify, Etsy, and eBay underwhelmed investors.
• While some companies beat earnings estimates, they provided weak guidance that rattled investors.
• Shopify and Wayfair both fell by about 18% in Thursday trades, while Amazon fell as much as 7%.

E-commerce stocks were slammed on Thursday, leading the market lower in a broad sell-off, after first-quarter earnings underwhelmed investors.

Shopify, Etsy, eBay, and Wayfair reported mixed results that often included weaker-than-expected forecasts for online shopping trends. That sent shares of Shopify, Etsy, and Wayfair down by as much as 18% in Thursday trades, while eBay fell by about 9%.

The broad selling in e-commerce stocks sent Amazon stock down by as much as 7% in Thursday trades, as the news from smaller rivals echoed Amazon's first-quarter earnings from last week.

Those results revealed that after a boom in e-commerce shopping amid the COVID-19 pandemic, growth trends are set to decelerate as the physical economy opens up and online shopping companies scramble to deal with a potential excess in capacity.

Etsy said it expects second-quarter revenue of $540 million to $590 million, well below analysts' expectations for $628 million.

And while Etsy, Shopify, and eBay were able to grow revenue in the first quarter, Wayfair was not. The furniture-based e-commerce company said first-quarter revenue fell 14% to $3.00 billion, which included a 10% drop in the US.

Hurting Shopify, aside from it missing its first-quarter earnings estimates, was its announcement of a $2.1 billion deal to acquire Deliverr, which is a shipping fulfillment technology operator. Investors may not be very excited about Shopify's deal given that Amazon just revealed it has a glut in warehouses and overcapacity in its logistics network.

But longer term, the e-commerce companies remain constructive on their businesses and are still observing a strong consumer, which could help propel the economy forward in the face of higher inflation and rising interest rates.

"While multiple macro cross-currents are filtering through the global economy, consumer health remains relatively strong," Wayfair CEO Niraj Shah said. That view echoes Fed Chair Jerome Powell, who said at yesterday's FOMC meeting that a healthy consumer could enable the Fed to stick a soft landing as it raises interest rates.

If that happens — and the economy is able to avoid a recession that the stock market is beginning to price in — it could lead to quite the relief rally in the same e-commerce stocks that are getting slammed by investors today.