You can always rely on a few things come the festive season. Grandma falling asleep in an armchair while holding a half-eaten chocolate, a game of family touch football ending in the neighbors threatening to ‘call the cops’ and the dog’s Christmas jumper being entangled in the tree within 30 seconds.
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In recent years post-Covid parents, sorry we mean Santa, preferring to buy their presents online rather than dare the cold, dark Main Street has also become an accepted festive trend.
But this year could be different. E-commerce stocks are struggling to deliver to both customers and investors as the holiday season approaches.
Cold Coal
Instead of having their stockings bulging with profits and revenues wrapped up in pretty bows, e-commerce stocks may be left with the thing all kids in ‘need of improvement’ fear – the lump of cold coal at the bottom. Not even a candy bar in sight!
According to analysis by Digital Commerce 360 of the most recent data from the U.S. Department of Commerce, in the second quarter U.S. e-commerce grew faster than total retail sales, but it also grew slower than in the first quarter this year and the same period in 2024.
It found that e-commerce sales grew at the slowest rate — 5.3% year over year — since the fourth quarter of 2022, when they increased 3.4%.
E-commerce expenditure in the U.S. and Europe is projected to moderate to 4–5% annual growth in 2025, down from pandemic-era increases of 20–25%.
Stocks are being hit by a blizzard of bad tidings as they nervously count down towards the big day. “E-commerce was once a steady growth area, but investors no longer see such a bright future,” said David Russell, Global Head of Market Strategy at online brokerage TradeStation.
Consumer confidence is at historically low levels with the University of Michigan’s Index of Consumer Sentiment posting a reading of 50.3 for November, down around 30% from the same time in 2024.
The current conditions index slid to 52.3, a drop of nearly 11% from October and the lowest in its history going back to 1951 when Harry Truman was still in the Oval Office.
Job Fears
Modern-day Americans were concerned about the impact of the lengthy U.S. government shutdown on the economy and their job prospects.
With good reason, it seems, given figures from ADP Research showing that US private employers cut 2,500 jobs per week on average during the four weeks ending November 1st. That followed an 11.25K decline in the previous period.
In addition, according to the appropriately named outplacement firm Challenger, Gray & Christmas, U.S.-based employers announced 153,074 job cuts in October, up 175% from the 55,597 cuts announced in October 2024.
“Some industries are correcting after the hiring boom of the pandemic, but this comes as AI adoption, softening consumer and corporate spending, and rising costs drive belt-tightening and hiring freezes. Those laid off now are finding it harder to quickly secure new roles,” said Andy Challenger at the group.
Tariff Price Hikes
President Trump’s tariff strategy is another threat to ecommerce stocks, despite it looking like some of the heat was coming off the issue following a round of trade deals between the U.S. and the U.K. and China.
Not so, according to analysis from S&P Global which has revealed that tariffs will cost global businesses upward of $1.2 trillion in 2025, with a third of the cost being passed onto consumers. That is on top of already persistently high inflation on consumer goods.
This can lead to shoppers looking at other non-online options or to delay purchases until there is more certainty. In addition, retailers have been making changes in requirements for popular services such as free shipping and next-day delivery to cut down on operational costs.
But wait, some might say. Stop being such an e-commerce Grinch!
Look at Amazon (AMZN), the ecommerce darling. Isn’t it performing well delivering a 12% year-over-year revenues hike to $180.2 billion in Q3?
Certainly, but the main drivers of that surge were its cloud offering Amazon Web Services and Amazon Advertising. Indeed, in its Q3 earnings release its first 15 highlights are all related to AI developments such as Trainium2, its custom AI chip and its Quick Suite agentic AI app. The number 16 highlight was its expansion of delivery services to rural communities.
Arguably, its success in AI is masking the weakness in broader ecommerce. And anyway, as the Grinch would add, a share price rise of just 1.50% in the year-to-date isn’t too much to smile about.
Stocks Feel the Chill
Other ecommerce stocks are also heading down a difficult path.
Shopify (SHOP) is limping into the holiday season with a share price rise of only 6% in the last 3 months. That’s despite Q3 delivering 32% Gross Merchandise Volume growth, 32% revenue growth, and an 18% free cash flow margin. That was on top of revenue growth of 31% in Q2 and 27% in Q1.
However, investors were spooked by its monthly recurring revenue (MRR), Shopify’s core subscription-based income stream, which produced $193 million, modestly below expectations of around $195 million. That indicates that subscription growth is lagging slightly behind its broader revenue momentum.
There are also concerns over its international expansion. Europe represents about 15–20% of Shopify’s GMV but given more aggressive stances taken from the EU against U.S. tech regulatory obstacles could arise.
Its P/E ratio of 102.5 is also leaving investors fretting.
eBay (EBAY) stock is down nearly 20% over the last three months. Again, it reported better-than-expected Q3 results with an 8% increase in gross merchandise volume (GMV) to $20.1 billion, revenue growth over 8% to $2.82 billion, and a 14% increase in non-GAAP earnings per share to $1.36.
However, international GMV growth was nearly 4% on an FX-neutral basis, affected by more challenging macroeconomic conditions outside the U.S. The main drag was the elimination of the de minimis exemption for small, packaged imports under $800 into the U.S. by the Trump administration.
Its main target is to stamp down on the amount of perceived lower quality goods arriving in the States from China and to bolster U.S. businesses and jobs.
Analysts at Bernstein recently lowered its price target on eBay to $90 from $95. It said that its strength in 2025 sets up a conundrum for the stock going into 2026. It argued that comparable sales will not be easy to lap and get progressively tougher. “The deceleration is well known, but could be pronounced in the second half of 2026,” it said.
Etsy (ETSY) stock is looking 12% less crafty in the last three months. It has also been hit by the dropping of de minimis with its Q3 gross merchandise sales (GMS) coming in at $2.43 billion, marking a 2.4% year-over-year decline. It also has a high P/E ratio of 38.1.
Truist analyst Youssef Squali however remains a fan. He recently raised his price target on Etsy to $80 from $75. He said that its Q3 results show that Etsy is making steady progress towards inflecting its GMS – gross merchandise sales – growth positively through improvements in Search, AI-powered recommendations, marketing efficiency and greater focus on app usage. This should re-ignite user growth and engagement.
E-Commerce Enablers
But there is also weakness to be seen in the ‘enablers’ of ecommerce – the payment and Software as a Service firms which keep the operations moving.
On the payments side PayPal (PYPL) is nearly 12% lower in the last three months, with Mastercard (MA) down 10% and Visa (V) off 6%. Indeed, both MA and V are under 200 day Moving Averages prompting sell signals.
This is once more despite all three stocks posting strong recent revenues. PYPL reported its sixth consecutive quarter of profitable growth, with non-GAAP earnings per share increase of 18% year-over-year. But branded online checkout Total Payment Volume (TPV) growth was impacted by tariffs, particularly in Chinese to U.S. corridors, which caused a slight deceleration in the numbers.
Block (XYZ) is also in bad shape dropping 16% in the last three months.
Cloud-based platform Wix (WIX), which helps people create and manage websites is down nearly 44% over the last six months with GoDaddy (GDDY) off 34% over the same period.
These are previously high growth stocks, still posting good revenues but increasingly challenged by weaker e-commerce numbers and the adoption of AI agents.
This is from AI-native start-ups as well as tech giants like Microsoft (MSFT), who are rapidly integrating advanced AI capabilities into their offerings.
“Growth investors used to love SMB SaaS companies for their subscription models and growing usage, but the AI theme has become much more popular,” Russell of TradeStation added.
Other ecommerce-linked stocks include digital and mobile commerce platform Affirm Holdings (AFRM) and tech-drive lending platform Upstart Holdings (UPST) are also creaking at the knees.
Pinterest (PINS) has been hit by its Q3 results where it missed earnings estimates and issued guidance that fell short of expectations. Pinterest CFO Julia Donnelly noted “pockets of moderating ad spend” across the U.S. and Canada.
Unhappy Holidays
It led Cathie Wood’s ARK Innovation to sell 1,876,328 PINS shares worth about $50.2 million this week.
Digital advertiser Trade Desk (TTD) is also falling amid the deterioration in e-commerce. In its Q3 earnings it noted that some large brands, particularly in consumer products, and parts of retail, were still feeling pressure from factors like tariffs and inflation. It also highlighted growing competition from the likes of Alphabet-owned Google (GOOGL) and Amazon (AMZN).
“Sentiment is gloomy, multiples are high and inflation is still an issue. It might not be a very happy holiday season for ecommerce players,” Russell said.