Why Newegg Commerce Stock Is Soaring 136% This Week

What happened

Shares of Newegg Commerce (NASDAQ:NEGG) have more than doubled this week, climbing 136% by early Friday, as the tech-focused online retailer seems to have cemented meme-stock status.

So what

When Newegg went public in May through a reverse merger with special purpose acquisition company Lianluo Smart, it didn’t garner investor notice. But the availability of option-based trading in early July sent the stock off to the races.

Image source: Getty Images.

As it suddenly became difficult to find options contracts, their scarcity caused more traders to want them, leading Newegg’s stock to open from under $17 a share on July 1 and hit $79 a week later.

Newegg closed below $53 a share on Thursday, down 28% from its high point, but it’s still a triple so far this month, and shares were up another 25% in morning trading on Friday.

Now what

Newegg is no fly-by-night operation, having been founded back in 2001 and earning a reputation as a leader in PC components and the build-your-own computer market. It remains a top online destination for computer components, consumer electronics, and peripherals, as well as smart-home and gaming products.

The tech company has grown earnings over 35% annually for the past five years, giving it a solid financial foundation to build on. The current frenzy over the stock isn’t connected to the fundamentals of its business, though, so while Newegg should be a stock that investors can put on their radar to buy, waiting for the mania to subside is the better option at this point.

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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.

View more information: https://www.fool.com/investing/2021/07/09/why-newegg-commerce-stock-is-soaring-136-this-week/

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