Why Newegg Commerce Is Falling Hard While the Market is Rising


What happened

Shares of Newegg Commerce (NASDAQ:NEGG) had fallen more than 16% by noon on Monday, continuing the pullback from the highs that the online consumer-tech retailer reached last week as options trading became available on the recent IPO, but were in short supply.

So what

Newegg is a top online destination for computer components, consumer electronics, peripherals, and smart-home and gaming products. The company just went public via a reverse merger with a special purpose acquisition company, or SPAC. It seemed to garner meme stock status almost immediately, and it soared over 1,000% very quickly.

Woman wearing headset gesturing with hands at laptop

Image source: Getty Images.

Yet there was no fundamental basis for the run-up in its shares, and having them return to earth rather quickly is to be expected. Even so, the stock remains up 167% from where it started last week, but investors shouldn’t be surprised to see it go lower still.

Now what

Newegg has a solid retail history and reputation, so this isn’t some fly-by-night penny stock. The long-term growth story is likely just as solid, but not at any price, and investors should wait for Newegg’s stock to return to more-reasonable and rational levels before they consider buying the online retailer.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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View more information: https://www.fool.com/investing/2021/07/12/why-newegg-commerce-is-falling-hard-while-the-mark/

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