The ASX E-Com Index is up a whopping 14.6% in the last fortnight, outperforming the ASX200 (+3%). But is it maintainable?
A number of loss-making tech and e-com shares seem to be experiencing a change in investor confidence. In the last fortnight, Adore Beauty has gained 23.1%, closing at $1.20 on Tuesday. Investors seem to be embracing the pureplay online retailer, despite the fact that it has made no announcements, nor is there any real news that would explain the share price boost. So too, Cettire’s shares have rebounded, up 37.1% in the same period to $0.48. Kogan hasn’t quite managed to continue its upwards trajectory that saw it close at $3.27 on Friday, but it has nevertheless managed a not insubstantial 14.4% gain in the last fortnight, to $3.10. Temple & Webster is similarly up 18.5% to $3.52. Redbubble is up 7.1% in the last 14 days, to $0.98, not quite able to maintain the $1+ price of last week.
So, what’s happening? Could it be a general consensus that e-com shares have bottomed? We’ve seen this pattern before, and yet there was always (sadly) lower to go. In the current climate, with pandemic pressures still looming combined with interest rate and inflation pressures, it seems unlikely that investors believe online retail is set for a comeback. And while Adore, Cettire, Kogan, Redbubble and Temple & Webster experienced shareprice growth in the last fortnight, the reality is, they are all markedly down year-on-year (-75.7%, -77.6%, -73.4%, -74.3% and -68.9% respectively). Still, if there’s a glimmer of hope, we’ll take it.
Source: Performance of ASX Listed E-Com Index based on ASX reporting for the period
Not all stocks on the E-Com Index have benefitted from a boost, however. The worst performer is Bike Exchange, which shed 13% over the last fortnight to $0.02. Despite hints of a potential recovery after it inexplicably jumped to $0.044 back in June (leading to ASX questions and that were answered with essentially a shoulder shrug), it has well and truly failed to maintain this momentum, and is now down a whopping 90.9% year-on-year. So too, Booktopia is down 89.1% year-on-year, though only -1.8% in the last fortnight, to $0.28. It’s been a difficult few months for the online book seller. It recently ousted Founder and former-CEO Tony Nash following an internal business review.
“As part of this process, the Board has determined that retaining Tony Nash as Chief Growth Officer, whilst at the same time appointing a new CEO was not in the best interests of the business going forward,” read the official Booktopia statement.
“Accordingly, the board has given Tony notice to step away from executive management of the Company in order to enable a new CEO to enter with a fresh start on well-laid foundations.”
Nash will remain as a Director of Booktopia, as well as a major shareholder of the business. While he will be able to assist the company under the terms of his contract, Nash will serve out a six-month notice period out of office.
The Booktopia shareprice initially recovered somewhat after this change in direction (up to $0.53 at close on Friday) but its momentum was short-lived.
As we head to full-year results, we expect to see further shake ups on the E-Com Index. Myer recently announced that online sales now represent 24% of total sales, increasing between 32.5 percent and 34.4 percent compared to FY21. Online sales now represent $715 million and $725 million for FY22. Its share price surged (to $0.485) following the announcement.
While the pureplay online retailers on the E-Com Index will be unlikely to experience the same boost post-results (if Q3 was anything to go by), what we are seeing is that the fear around the future of e-com has somewhat dissipated. If the last fortnight is anything to go by, we have turned a corner after a disastrous first half of the year on the ASX. Baby steps, bated breath and tentative optimism, but optimism, nonetheless.
Figures are current as at close of ASX on 26 July 2022. This is analysis only and not intended as investment advice.
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