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Travel and E-Commerce Face a 2023 Slowdown, Analyst Warns

Wolfe Research downgraded Chewy to Peer Perform from Outperform.

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Daniel Acker/Bloomberg

Seeing trouble ahead for consumer spending, Wolfe Research analyst Deepak Mathivanan on Wednesday turned cautious on both the e-commerce and online travel sectors, cutting his ratings on stocks in both groups.

Mathivanan changed his call on the e-commerce sector to Market Weight from Overweight. His view is that growth “is likely to show high sensitivity to retail sales and consumer spending trends during the macroeconomic slowdown in 2023.” Sales growth for many e-commerce companies benefited from inflationary tailwinds in 2022, he said, arguing that should be a less significant factor next year. Wall Street’s consensus calls on 2023 revenue and earnings are too high for many companies in the sector, he said.

The Wolfe analyst cut his ratings on both the e-commerce software company
(SHOP) and online pet products seller
(CHWY) to Peer Perform from Outperform. “We think growth deceleration under a weakening macro could have high sensitivity on multiples for these two stocks,” Mathivanan wrote.

For Shopify, he said, gross margin “could be under sustained pressure over the next few quarters” due to faster growth in the company’s lower-margin payment revenue, plus investment in its fulfillment network. He said “profitability is a few quarters away,” and that “any incremental deceleration could have a significant impact on multiples.”

Chewy trades at a premium valuation that could come under pressure if growth in the top line slows, Mathivanan said, noting that the downgrade isn’t a call on the company’s October quarter earnings report. The numbers are due on Thursday.

As for online travel, Mathivanan cut his view on the group to Underweight from Market Weight. “Travel demand is likely to moderate amidst macroeconomic slowdown in 2023 and consensus does not appear to reflect the magnitude accurately,” the analyst wrote. He also thinks that valuation multiples are likely to be under pressure as estimates ratchet lower over the next 12 to 18 months.

Mathivanan cut his ratings on both
(EXPE) and
(TRIP) to Underperform from Peer Perform, while reducing Booking (BKNG) to Peer Perform from Outperform.

Expedia stock appears cheap in terms of valuation, he said, but added that “the company appears to be between a rock and a hard place from market share losses and margin compression during a downturn in 2023.”

For Tripadvisor, he said, the company’s long-term value proposition to travelers “has been eroding steadily in recent years.” He thinks Tripadvisor’s marketplace model will faces challenges when demand slows in 2023 and online travel agencies seek to improve the efficiency of their marketing spending.

Booking, he said, is the “best-in-class online travel company,” but he is concerned that high exposure to Europe will bring increased risk in 2023.

On Wednesday, Shopify and Chewy are down about 1%, while Booking is 4% lower. Expedia is off 5% and Tripadvisor has tumbled 7%

Write to Eric J. Savitz at


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