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Why, Shopify, and MercadoLibre Stocks Dropped Today

What happened

Shares of online retail stocks were taking a beating in Friday trading, with Shopify (NYSE: SHOP) stock falling by 5.2% through 2:37 p.m. EDT, MercadoLibre (NASDAQ: MELI) down by 4.5%, and e-commerce leader (NASDAQ: AMZN) off by 2.3%.

And while the other stocks are suffering more, it looks like this slide was triggered by comments an analyst made regarding his concerns about Amazon.

Image source: Getty Images.

So what has the news. As it reported Friday morning, analyst Stephen Ju at Swiss mega-bank Credit Suisse cut his price target on Amazon shares by more than 10% to $4,200, based on his estimate that Amazon will earn only $70.98 per share this year and $79.83 per share next year.

Credit Suisse's new earnings projections reflect a reduction of 12% this year, and a staggering 33% reduction in expectations for 2022. As Ju explained, Amazon has boosted wages for its fulfillment center employees this year, announced future compensation increases and signing bonuses, and says it needs to add "~150k personnel ... in 4Q21" as well -- all moves that speak to higher shipping and fulfillment costs for the company.

At the same time, Credit Suisse warned that, in its view, the global logistics headwinds won't ease up until mid-2022, resulting in lower profits for Amazon this year, and significantly lower profits next year.

Now what

That may explain why Amazon stock fell Friday -- but why were Shopify and MercadoLibre getting hit even harder?

Well, consider: Amazon isn't spending all this money for nothing. Credit Suisse's Ju predicted that investing in the company's workforce will result in better customer service and faster deliveries. He also praised Amazon for turning its inventory over faster than the competition, and said it has "greater visibility on supply chain/ logistics challenges." All of these are competitive advantages for Amazon over rival retailers of both the e-commerce and brick-and-mortar varieties.

That's bit is more relevant to Shopify than it is to MercadoLibre, of course, as Shopify's retail customers are the ones in more direct competition with Amazon. Of direct significance to both MercadoLibre and Shopify, however, were Ju's comments on "global logistics headwinds," which promise to depress sales and slow growth at retailers of all stripes.

I suspect that Credit Suisse's prediction that global supply chains won't get unkinked for another eight months was the bigger factor in the share price declines of Shopify and MercadoLibre Friday.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, MercadoLibre, and Shopify. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon, long January 2023 $1,140 calls on Shopify, short January 2022 $1,940 calls on Amazon, and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.


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