With Its Drop to Penny Stock Levels, Newegg Commerce Is Worth a Look

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Louis Navellier and the InvestorPlace Research Staff

Sat, May 14, 2022, 4:30 AM 4 min read

The selloff among tech stocks has pushed Newegg Commerce (NEGG) below $5 per share.
Despite its reputation as a meme stock, there’s a lot more to it than that.
Still growing at a steady pace (as seen in its latest earnings report), you may want to consider NEGG stock after its recent weakness.

A magnifying glass zooms in on the website for Newegg (NEGG)

Source: OleksandrShnuryk / Shutterstock.com

With its move to under $5 per share, Newegg Commerce (NASDAQ:NEGG) has fallen into penny stock territory. This is a stunning reversal for NEGG stock. Over the past twelve months, it traded for as much as $79.07 per share.

If you got in near its highs, I can understand why you may want to sell and move on. But if you don’t own it? I wouldn’t take a hard pass on it right off the bat. Instead, you may want to instead dig deeper into the details with this online retailer of technology products.

Why? Newegg may have a reputation as a meme stock. Specifically, one of the scores of “also ran” meme stocks that experienced sharp spikes during 2021 that it couldn’t sustain. Yet if you take a closer look, you’ll realize there’s a lot more to its story than just its connections to the meme stock phenomenon.

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NEGG

Newegg Commerce

$4.84

NEGG Stock at a Glance

Based in California, as mentioned, Newegg Commerce is a technology e-commerce company. Since its founding more than twenty years ago, it has scaled into a leader online retailer of electronics and PC components. To many, it may not be the most exciting business out there.

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Still, boring or not, it has found success targeting this niche. At present, it’s a multibillion dollar business, still growing at a steady pace (more below). Along with this, it’s also consistently profitable. That’s something a lot of tech names, even some of the most promising ones, have yet to achieve.

In short, the “meme stock” reputation NEGG stock has is a bit unfair. Yes, on several occasions in 2021, speculative frenzy, not anything in particular with its fundamentals, may have resulted in several temporary spikes in price. However, the meme stock trend has all but played out.

Going forward, chances are Newegg will be judged more on its fundamentals, and less on its popularity among the Reddit trading community. While this may not counter the downward pressures being placed on it at the moment, In the long run though, continued strong fiscal results could be what helps this stock make a comeback.

Newegg’s Latest Financials Show it’s Still Growing

Getting financials on NEGG stock is not straightforward. Although its operating business is based in the U.S., this entity is incorporated in the British Virgin Islands, and is majority owned by Chinese technology company Liaison Interactive.

With this, it’s classified as a “foreign private issuer,” and therefore doesn’t file annual (10-K) and quarterly (10-Q) reports like a U.S. based company. Instead, it provides investors with financials via an annual 20-F filing. Yet while this can create a time lag, with the filing of its 20-F filing for 2021 last month, we do have an idea of Newegg’s current performance.

For 2021, Newegg reported $2.38 billion in total revenue, up around 12.3% for the year. Not bad, given challenges presented by the global semiconductor shortage. Net income of $36.2 million was up around 19.2% from 2020. Yes, growth slowed down year-over-year. In 2020, thanks to pandemic tailwinds, revenue grew 37.9%. It also swung from a net loss to a net profit.

But the 2021 figures do show us that, far from the pandemic being a “one and done” event, the company is retaining the increased business, and building on it through continued growth.

The Verdict on NEGG Stock

It goes without saying that Newegg Commerce is not a stock for everybody. Shares could see further volatility, and not only because of its ties to the meme stock phenomenon. Its status as a “Chinese stock,” is a concern to some as well. This is due to fears that regulatory scrutiny will lead many Chinese stocks to delist from U.S. exchanges.

Nevertheless, much of this risk is likely accounted for in today’s valuation. With its move back down to penny stock territory, it’s clear the meme crowd isn’t as active in it as it once was. It’s no longer moving primarily on the meme crowd’s whims. Instead, going forward, it will likely instead move on its own merits.

Bottom line: you may want to consider NEGG stock today. It’s showing steady growth, with a possible boost from when the chip shortage eases.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.