ASX shares involved with online shopping and delivery have seen a brutal sell down in their share prices recently. This has been, in part, due to a rash of negative commentary from fund managers in relation to valuations. In particular, concern has mounted as to whether companies like this will be able to sustain their current levels of sales performance once the economy has normalised again.
Since March, we have seen a boom in the share prices of many pure-play online companies, as well as traditional bricks and mortar businesses operating a successful online presence. For example, Catch.com.au, a subsidiary of Wesfarmers Ltd (ASX: WES), has reported gross transaction value increasing almost 50% since acquisition. Nonetheless, it is undeniable that consumers have been somewhat forced into online shopping by the pandemic.
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Fund managers concerned for share prices
Last week, Chris Tynan of DNR Capital commented on the valuation of e-commerce companies. This was at the end of the week when MyDeal.com.au Ltd (ASX: MYD) saw its share price shoot up by more than 80% on its ASX initial public offering (IPO). Mr Tynan said:
You've got some of the strongest retail investor interest I've ever seen and tangible FOMO [fear of missing out] in the market, so IPOs are getting away today that wouldn't be touched with a 10-foot pole a year ago.
At the same time, Kogan.com Ltd (ASX: KGN) had seen its share price fall by 15.5% in the previous four days trading. Similarly, Redbubble Ltd (ASX: RBL) had witnessed its share price crash by 22% over the same time, while the Marley Spoon AG (ASX: MMM) share price collapsed by 26%.
There has also been a strong indication of profit taking amongst fund managers in particular. Ben Clark, portfolio manager at TMS Capital said:
What we're seeing is the fundies and maybe the long-short funds starting to look at getting out of the 'COVID winners' and pick up stocks that've been hammered by COVID…So I think there's more of a rotation going on. We're getting close to vaccine announcements, and that's probably going to be the catalyst for that trade to keep going.
The return to favour
Nevertheless, all of these companies, as well as fellow e-commerce growth engine Temple & Webster Group Ltd (ASX: TPW) appear to have regained the favour of investors as all have seen positive movements in their share prices today.
Temple & Webster has seen the most explosive growth of all of them during today's trade so far. At the time of writing, the Temple & Webster share price has risen by nearly 11% to $10.90 . This is largely due to a continuing high level of sales growth, even though most of the country is now out of lockdown.
The Redbubble share price is second with an impressive 10.61% increase at the time of writing. The company recently reported outstanding year-on-year growth for Q1FY21. This included a 114% increase in total revenue, as well as a 1550% increase in earnings before interest and taxes (EBIT).
Marley Spoon is coming in third place today with a very respectable 5.2% increase in its share price. Marley Spoon, the meals home delivery company, has recently completed a $56 million placement to fund global growth. In addition, the company reported a 163% increase in sales revenue versus the previous corresponding period, with growth in the United States being a major contributor.
The Kogan share price is currently fourth in the group, with a rise of 3.5% at the time of writing. Kogan appears to be a favourite of investors with the company's share price rocketing upwards by 185% in year-to-date trading. While there has been no recent news from Kogan, it did report very strong results in FY20.
Foolish takeaway
After taking flight for a short time, investors are piling back into profitable and growing e-commerce companies. Many of these companies have still reported strong growth and sales, even though many markets are commencing the return to normalisation. Added to this is the international growth of some, such as Marley Spoon. Nonetheless, there is still a lot of uncertainty in this space which should become clearer over the next few months.
