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U.S. Online Retail and Ecommerce Industry Analysis

UpdatedSep 24, 2022
DataAggregated Company Financials
Companies102
  • 7D-8.1%
  • 3M-9.0%
  • 1Y-39.6%
  • YTD-34.2%

Over the last 7 days, the Online Retail and Ecommerce industry has dropped 8.1%, driven by a pullback from Amazon.com of 7.9%. Meanwhile, Xometry actually outperformed within the industry, gaining 5.9% in the last week. The industry has fallen 40% in the last year. Looking forward, earnings are forecast to grow by 46% annually.

Industry Valuation and Performance

Has the U.S. Online Retail and Ecommerce Industry valuation changed over the past few years?

DateMarket CapRevenueEarningsPEAbsolute PEPS
Sat, 24 Sep 2022US$1.7tUS$881.1bUS$14.4b20.2x118.3x1.9x
Mon, 22 Aug 2022US$2.0tUS$891.7bUS$13.2b18.9x150.5x2.2x
Wed, 20 Jul 2022US$1.8tUS$886.1bUS$27.5b15.9x64.7x2x
Fri, 17 Jun 2022US$1.7tUS$892.4bUS$26.0b17.2x63.8x1.9x
Sun, 15 May 2022US$1.7tUS$879.7bUS$27.4b13x62.1x1.9x
Tue, 12 Apr 2022US$2.2tUS$889.8bUS$42.0b15.6x52.4x2.5x
Thu, 10 Mar 2022US$2.1tUS$885.3bUS$42.8b22.8x49x2.4x
Sat, 05 Feb 2022US$2.3tUS$867.7bUS$56.6b20.5x41.1x2.7x
Mon, 03 Jan 2022US$2.5tUS$856.2bUS$49.6b21.1x49.9x2.9x
Wed, 01 Dec 2021US$2.6tUS$854.2bUS$49.8b21.9x53.2x3.1x
Fri, 29 Oct 2021US$2.8tUS$820.8bUS$58.9b33.3x46.9x3.4x
Sun, 26 Sep 2021US$2.7tUS$817.1bUS$58.9b36.2x45.9x3.3x
Tue, 24 Aug 2021US$2.7tUS$815.9bUS$59.0b29.4x46.2x3.3x
Wed, 30 Jun 2021US$3.0tUS$815.8bUS$59.0b34.6x51x3.7x
Sat, 03 Apr 2021US$2.8tUS$750.7bUS$60.1b31.9x46.1x3.7x
Tue, 05 Jan 2021US$2.9tUS$682.0bUS$55.3b21.4x52.4x4.3x
Fri, 09 Oct 2020US$2.7tUS$606.3bUS$41.8b28.6x65.8x4.5x
Thu, 02 Jul 2020US$2.3tUS$558.8bUS$39.7b25.2x58x4.1x
Sun, 05 Apr 2020US$1.7tUS$517.0bUS$30.8b22x54.5x3.2x
Wed, 08 Jan 2020US$1.7tUS$497.4bUS$36.9b27x45.5x3.4x
Tue, 01 Oct 2019US$1.5tUS$465.9bUS$32.4b28.7x45.5x3.2x
Price to Earnings Ratio

45.5x


Total Market Cap: US$1.5tTotal Earnings: US$32.4bTotal Revenue: US$465.9bTotal Market Cap vs Earnings and Revenue0%0%0%
U.S. Online Retail and Ecommerce Industry Price to Earnings3Y Average 58.8x202020212022
Current Industry PE
  • Investors are optimistic on the American Online Retail industry, and appear confident in long term growth rates.
  • The industry is trading at a PE ratio of 118x which is higher than its 3-year average PE of 58.8x.
  • The 3-year average PS ratio of 3.5x is higher than the industry's current PS ratio of 1.9x.
Past Earnings Growth
  • The earnings for companies in the Online Retail industry have declined 24% per year over the last three years.
  • Meanwhile revenues for these companies have grown 24% per year.
  • This means that although more sales are being generated, either the cost of doing business or the level of investment back into businesses has increased, which has decreased profits.

Industry Trends

Which industries have driven the changes within the U.S. Consumer Discretionary industry?

US Market-5.22%
Consumer Discretionary-8.18%
Online Retail and Ecommerce-8.14%
Ecommerce-8.14%
Industry PE
  • Investors are most optimistic about the Ecommerce industry which is trading above its 3-year average PE ratio of 58.8x.
    • Analysts are expecting annual earnings growth of 46.1%, which is higher than its past year's earnings decline of 41.1% per year.
Forecasted Growth
  • Analysts are most optimistic on the Ecommerce industry, expecting annual earnings growth of 46% over the next 5 years.
  • This is better than its past earnings decline of 41% per year.

    Top Stock Gainers and Losers

    Which companies have driven the market over the last 7 days?

    CompanyLast Price7D1YValuation
    XMTR XometryUS$60.055.9%
    +US$159.3m
    2.9%PS9.4x
    SSU SIGNA Sports UnitedUS$5.593.9%
    +US$70.2m
    -43.5%PS1.8x
    POSH PoshmarkUS$14.383.8%
    +US$40.8m
    -39.8%PS3.3x
    CANG CangoUS$2.186.9%
    +US$19.4m
    -47.0%PS0.7x
    JWEL Jowell GlobalUS$2.4013.2%
    +US$8.8m
    -60.6%PS0.4x
    Simply Wall St
    Simply Wall Street Pty Ltd
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    Simply Wall Street Pty Ltd (ACN 600 056 611), is a Corporate Authorised Representative (Authorised Representative Number: 467183) of Sanlam Private Wealth Pty Ltd (AFSL No. 337927). Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situation or needs. You should not rely on any advice and/or information contained in this website and before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice. Please read our Financial Services Guide before deciding whether to obtain financial services from us.

    Latest News

    PDD

    US$60.05

    Pinduoduo

    7D

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    1Y

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    Sep 21

    MercadoLibre: A Fintech Juggernaut

    Summary MercadoLibre is the largest online commerce and payments ecosystem in Latin America spanning 18 countries. The Fintech Solutions division of the business, MercadoPago and MercadoCredito, is set to become the largest source of revenue for the company before the end of 2022. The narrative of MercadoLibre as an e-commerce business with significant competition is shifting to a fintech business with a strong ecosystem. The macro headwinds have always been present for MELI, but they continue to beat estimates and fire on all cylinders. Editor's note: Seeking Alpha is proud to welcome Jonah Lupton as a new contributor. It's easy to become a Seeking Alpha contributor and earn money for your best investment ideas. Active contributors also get free access to SA Premium. Click here to find out more » Thesis: Profitable Growth MercadoLibre (MELI) is largely known as the Amazon/eBay of Latin America due to its e-commerce business. While e-commerce in LatAm will continue to grow significantly at an approximate 25% CAGR between 2021-2025 as projected by Americas Market Intelligence (AMI), the Fintech Solutions of MELI is the segment to watch closely as it is currently, and will remain, the main growth engine of the whole company. Within the underbanked geography of Latin America lies the fintech juggernaut, MercadoPago, which is set to overtake MELI's revenue from e-commerce in Q4'22 if we assume consistent QoQ growth rates of 23% and 10% (see below projections). In fact, it could even happen in Q3'22 considering a 10% QoQ growth rate for e-commerce is generous given current macro headwinds. Regardless of when it happens, the narrative surrounding MELI as an e-commerce company is beginning to shift to fintech and I believe it is currently being underappreciated by the market and masked by e-commerce macro news. Author's projections MELI reinvests a large portion of capital into their business growth while remaining profitable, sustaining free cash flow generation, expanding margins, and also increasing take rates. The take rate for the fintech segment is particularly strong and expanded to 3.95% in Q2'22 from 3.84% in Q1'22 and 3.20% in Q2'21. Take rate will be an important metric to monitor every quarter considering the significant growth of TPV and the credit portfolio since it is a function of gross fintech revenues. MercadoLibre presentation Exceptional Fintech Growth Fintech revenues overall for Q2 2022 grew 107% YoY to $1.19B. In comparison, the e-commerce/marketplace revenues for Q2 2022 grew 23% YoY to $1.40B. Mercado Pago is an integrated online and offline payment solution, card issuer, and digital wallet that just surpassed TPV (Total Payment Volume) of $30B in Q2 2022 for the first time ever. google search MercadoPago grew total TPV 84% YoY (FX-neutral basis), which is impressive, but let's dig deeper to see what is responsible for driving this growth. ON Marketplace TPV: "Measure of the total U.S. dollar sum of all marketplace transactions paid for using MercadoPago, excluding shipping and financing fees." OFF Marketplace TPV: "Measure of the total U.S. dollar sum of all transactions paid for using MercadoPago through merchant services for online payment, MPoS, QR and Wallet Payments, and Card payments." The Off Marketplace TPV, which is the crown jewel, grew 135% YoY and now makes up 70% of the total TPV for MELI. I would love to see this continue at high growth rates because it enhances their market penetration and serves an underbanked population to help digitize LatAm. A significant reason I am very bullish on the future growth and profitability of MELI is that Pago has been growing Off Marketplace TPV by over 100% YoY which will serve as a key growth driver because it broadens their reach to bring brand new customers into the MercadoLibre ecosystem of products and services. This obviously opens up further opportunities for cross-selling. MercadoLibre presentation The Digital Accounts TPV within the Off Marketplace TPV is the area that is capitalizing on the underbanked region of LatAm and consists of wallet payments, P2P transfers between MercadoPago Wallets, and prepaid, debit and credit cards. The Digital Accounts TPV grew at 189% YoY on an FX-neutral basis showing they have been successful at bringing on new customers and introducing digital payments to a population which has lacked banking innovation for many years. The significant growth was driven not only by the incremental addition of unique fintech users but also from existing users increasing their transactions on wallet payments/transfers, QR, and card usage. This demonstrates that once a new user creates an account, they continue to increase their usage over time. Not Fazed By Geographic Headwinds What's even more impressive is that MELI continues to execute over the past 10 years with consistently high growth rates amid significant decreases in GDP per capita in their main operating regions. In comparison, the rest of the world has seen increases in GDP per capita. It appears the secular tailwinds of e-commerce and fintech innovation have created a stronger push than the numerous macro headwinds pushing back.

    EBAY

    US$38.19

    eBay

    7D

    -9.1%

    1Y

    -47.7%

    POSH

    US$14.38

    Poshmark

    7D

    3.8%

    1Y

    -39.8%
    Sep 20

    Poshmark: Initiating Coverage On Social Marketplace Leader

    Summary Poshmark has had a solid Q2 financial performance with growth in revenue and other key metrics. The company continues to post net losses, and other profitability metrics have worsened YoY. Poshmark faces major risks facing from increased competition and a slowdown in the U.S. economy. We recommend a "HOLD" on Poshmark, as we believe investors should wait until there's more clarity until starting a position. Thesis We are initiating coverage on Poshmark, Inc. (POSH) and are recommending a "HOLD" as we believe that there are too many risks facing the business during these uncertain economic times. The company has shown mixed financial performance in its recent earnings report, but the metrics are generally positive. However, we are concerned about the continued unprofitability, and we believe that major risks such as competitive and macroeconomic risks will continue to affect the company's bottom line. Company Overview Poshmark is a social commerce marketplace where users can buy and sell new and secondhand fashion, home goods, and electronics. The company operates a platform that is the leading social marketplace for new and secondhand style for women, men, children, pets, home, and more. The platform has over 80 million users, with over 200M available listings. Poshmark completed its IPO at $42 per share, with a valuation of $3 billion. The stock price began trading after its IPO at $97.50 per share, at a valuation more than double its IPO valuation. The company's stock performance has tracked the S&P 500 year-to-date, with Poshmark returning -15.38% compared to S&P 500's return of -18.82%. Poshmark has a market capitalization of $1.13 billion. Data by YCharts Recent Earnings Some Positives Poshmark had some solid YoY quarterly financial performance growth, mostly notably in its net revenue. The company reported a net revenue of $89.1 million in Q2 2022, which represented a 9% YoY growth compared to $81.6 million in Q2 2021. Gross Merchandise Volume ((GMV)) which measures the volume of the sales of goods sold in the marketplace also rose 8% YoY. Furthermore, management reported that in the last 12 months, the number of active buyers reached 8 million users, which represents a 14% YoY growth compared to the same metric in Q2 2021. We view the YoY revenue growth, GMV growth, and the increase in the number of active users as good signs that the company continues to grow and gain traction within the industry. In addition, the company has had $581.2 million in cash on the balance sheet, which is nearly half of the current market capitalization of the company. As a result, we view the balance sheet as fairly safe as well. Data by YCharts Some Negatives There were some poor financial metrics in the earnings announcement as well. First and foremost, the net loss per share expanded from -$0.03 per share in Q2 2021 to -$0.29 per share in Q2 2022. Similarly, the Adjusted EBITDA also turned negative on a YoY basis, with Adjusted EBITDA being -$9.8 million this past quarter compared to $6.5 million in the quarter a year ago. Guidance for this Q3 2022 remained negative, with Adjusted EBITDA range coming at a range of -$9 million to -$11 million. The declining profitability metrics are concerning, and though the company has ample liquidity as a result of the IPO, we believe that management needs to provide a better guidance of profitability metrics in the future to make us recommend the stock. Q3 2022 Poshmark Earnings Presentation Major Headwinds Competitive Risks Poshmark is one of many competitors operating in the luxury resale space, with large fashion-oriented players like Farfetch (FTCH), Grailed, TheRealReal (REAL). In addition, there are larger e-commerce players like eBay (EBAY), Etsy (ETSY), Amazon (AMZN), Walmart (WMT), and other businesses that also have a component of fashion resale in its product line. We believe that such a wide array of players in the space will make it hard for Poshmark to improve profitability metrics, as the company will need to continue to spend to attract users and remain commissions low in order to keep sellers at Poshmark. Macroeconomic Risks

    CPNG

    US$16.08

    Coupang

    7D

    -8.8%

    1Y

    -43.2%
    Sep 20

    Coupang: Investors Welcome Its New Focus On Profits

    Summary Coupang is moving its narrative away from a growth business, to a profitable enterprise with some growth. In the current market, investors are going to welcome this new focus. Even though its shareholder base will have to change to one with lower expectations. I estimate that Coupang could exit Q4 2023 on a run rate of $500 million to $700 million of EBITDA. This would put the company priced at 62x to 44x next year's EBITDA. And I believe that this multiple would rapidly move lower as we get to 2024. In conclusion, I am bullish on this name. Investment Thesis Coupang (CPNG) is down 60% since its IPO. Even though investors' enthusiasm for Coupang has mostly gone, I believe that its stock offers investors a rewarding investment opportunity. In my previous article I said, "Coupang's revenue growth rates are rapidly slowing and leave much to be desired. That is a headline risk." And while I recognize that I was too early to call the bottom on this name, I believe that this time it's different. Author's work Coupang has been focusing its narrative away from its topline growth to a strategy of profitable growth. And it's easy to see that it's succeeding. All considered I believe that 1x next year's revenues, is an attractive valuation for a business that clearly has a moat around its operations. Revenue Growth Rates Rapidly Slow Down CPNG revenue growth rates On the surface, the graphic above doesn't inspire much confidence. It's a business that is consistently slowing down its revenue growth rates. But when we spend a little more time, we can see two different conclusions. In the first case, not shown above, is that on a currency-adjusted basis, revenues were up 27% y/y. That's clearly a fair revenue growth rate. Secondly, last year's comparisons were really tough. Particularly H1 2021. For the remainder of 2022, the comparisons rapidly become significantly better. What's Next For Coupang? Coupang is a Korean eCommerce player. Coupang aims to be the fastest e-commerce delivery service in Korea. As Coupang's founder and CEO says, Coupang wants to wow its customers, going so far as to call its version of Prime customers, WOW members. In an effort to wow customers, it continues to find ways to get more mindshare with its customers, by offering free Rocket deliveries (grocery offering), and free Coupang Play video content. As you know, Korea's population is small, at approximately 51 million. CPNG Q2 2022 But Coupang's mission isn't on getting to saturation. In the table above we see the bull case depicted. Cross-selling into its Active Customer base was up 20% y/y at constant currency, green arrow. Clearly, customers are resonating with Coupang. There's no other reason why this far into lapping Covid, customers would be increasing their average order value. What's more, keep in mind what Coupang proclaims, While we've grown to significant scale, we remain a small portion of what is expected to soon become the third largest e-commerce opportunity in the world. We are eyeing up a business that could well become a leading e-commerce player in the third largest e-commerce country in the world, ahead of Japan and the UK. I believe that the best way to ensure wallet share with consumers throughout the economic cycle is by being the low-cost platform, something that KPNG found to be in a recent study. At its core, that's a moat that is not so different from other investors' favorites such as Costco (COST). Path to Profitability Continues to Pick Up Momentum As I've maintained for a while, Coupang had expected to exit Q4 with EBITDA profitability, so that it would enter 2023 EBITDA profitable. However, given that the first half of 2022 saw a negative $25 million of EBITDA, the best that Coupang could previously offer was to reach under negative $400 million of EBITDA for 2022. This was the guidance provided back in Q4 2020. But this has now all changed. Indeed, Coupang now declares that rather than 2022 seeing a less than negative $400 million, it would actually finish the year at breakeven, an approximate $400 million improvement from its Q4 2021 guidance. It now seems very possible that when Coupang exits Q4 2023, it could be on a run rate of at least $500 million of EBITDA. That would put the stock priced at 62x next year's EBITDA.

    Sep 19

    Alibaba And Tencent: Reminiscent Of Google In 2009

    Summary Within the shadows of geopolitical fears and a looming real estate collapse lie the deeply discounted empires of Alibaba and Tencent. BABA and TCEHY are comparable to Google in 2009. Is a 10x in the cards? Chinese citizens are structurally underinvested in stocks, but that’s about to change. In the decade ahead, we project returns of 20% and 18% per annum for Alibaba and Tencent. The Thesis While the risks are undeniable, the reward appears to justify an allocation to Alibaba Group Holding Limited (BABA, [[BABAF]]) and Tencent Holdings Limited (TCEHY, [[TCTZF]]). These stocks look a lot like Alphabet Inc. ([[GOOG]], GOOGL) ("Google") in 2009. We'll dig into why this opportunity exists, analyzing the macro uncertainties and geopolitical risks. While this is not for the faint of heart, it often pays to "buy when there's blood in the streets." As Cheap As Google In 2009? 2022, Tencent 2022, Alibaba 2009, Google P/E Ratio 13.1 11.8 11.6 Price To Sales 4.2 1.8 2.2 Price To Book 3.2 1.6 3.4 Return On Equity (ROE) 22% 13% 16% Net Margin 32% 15% 19% Note: Used forward estimates for Alibaba's PE, ROE, and Net Margin to adjust for significant asset write-downs and other non-cash items. Image created by author with data from YCharts. As you can see, Tencent is valued at a premium to Google in 2009, and Alibaba is valued at a discount to Google in 2009. However, Google was an inferior business to Tencent on a profitability basis and a superior business to Alibaba on the same metrics (Net Margin & ROE). In 2009, the American financial system appeared to be melting down. Businesses and households were capitulating and entering bankruptcy, while major banks like Lehman Brothers went under. A domino effect could have been set off if the federal reserve had not stepped in. This caused Google, a company with extremely strong fundamentals, to trade at such a depressed level that it went on to 10x over the decade ahead. Likewise, in 2022, the real estate bubble in China appears to be slowing imploding. Many estimate that China's enormous property developer, Evergrande Group could also go under. Not unlike the United States in 2008, Chinese citizens are heavily invested in real estate, and structurally underinvested in stocks. In fact, Chinese residential real estate is currently the world's largest asset class: Global Asset Classes (New Money) With Alibaba and others targeting a primary listing in Hong Kong, Chinese citizens will be able to trade its shares domestically for the first time. Like the U.S. over the past decade, we expect more and more Chinese capital to flow into the equity market. Consumption should also resume in the country, coming out of a difficult period of COVID-19 lockdowns and economic troubles. All of this should be a boon for the shares of Tencent and Alibaba. Deep Economic Moats While Tencent and Alibaba enjoy market leading positions in China within industries like gaming (Tencent) and the cloud (Alibaba), we believe each of these businesses has a key asset, which ties everything else together. For Tencent, that asset is WeChat and for Alibaba, that asset is Taoboa. WeChat could be the most dominant mobile app in the world; it's a super-app that encompasses Chinese social media, messaging, and mobile payments. While Alibaba's Alipay is a strong rival in mobile payments, WeChat is essentially the king in messaging and social media with 1.24 billion users. This is an exceptionally strong advertising avenue for Tencent. The company can boost its investees by pushing products on the app. Famed investor Mohnish Pabrai described WeChat as a "bazooka" that Tencent can fire at its competition. Alibaba's Taoboa has a similar network effect. Taoboa is the number one shopping platform in China. Combined with Alibaba's other commerce avenues, the company reaches more than 900 million consumers in China. Its brands are intertwined with businesses throughout the country, and entrenched in the minds of consumers. This allows Alibaba to sell advertising, cloud services, and premium memberships, while "making is easy to do business anywhere." Consumers in the Alibaba ecosystem enjoy the convenience of services like Ele.me delivery, Amap navigation, and Alipay mobile payments. Charlie Munger's lollapalooza effect applies to Taobao's shopping experience, which encompasses a great product, powerful stimulants, availability, clever marketing, and social proof. Tencent and Alibaba's economic moats are evident in their revenue growth: BABA Revenue ((TTM)) data by YCharts Over the past 8 years, Alibaba has grown its revenue at 35% per annum and Tencent at 23% per annum, all the while maintaining strong balance sheets. Fear And Uncertainty When it comes to Alibaba and Tencent, the discount exists not only due to economic hardship in China, but due to fear and uncertainty surrounding the geopolitical landscape. When Russia invaded Ukraine, sanctions were used as a deterrent. Russian stocks were barred from trading on many international exchanges. Recent tensions in the Taiwan Strait have caused many to fear war between China and Taiwan. Between this, the VIE structure, and China's CCP, the risks stretch far beyond internal operations. Just because these are financially and competitively resilient companies doesn't mean the stocks can't go to zero. Investors must weigh this risk appropriately within a diversified portfolio, more on this latter. The Valuation Tencent has a lot of investees; its equity portfolio is said to be worth $88 billion. Tencent is an early-stage investor, and its portfolio was once worth much more. The equity holdings had a lot of exposure to unprofitable tech, which melted down over the past year. Still, Tencent's portfolio represents 25% of its market cap. We suspect the equity portfolio is now closer to fair value as the excess drains out of the tech sector, especially in China.

    CANG

    US$2.18

    Cango

    7D

    6.9%

    1Y

    -47.0%
    Sep 08

    Cango Adds Used Cars, New Core App As Business Hits Second Quarter Speed Bump

    Summary Cango’s revenue fell 69% in the second quarter due to disruptions from China’s strict Covid controls, but it forecast the figure would start to rebound in the current quarter. Company added two important pieces to its emerging car-trading business model with the rollout of its Haoche app and launch of a used car trading platform. The company conducted 2,291 car-trading transactions over its platform during the quarter, down from 6,827 on its Haoche miniapp in the previous quarter. Talk about hitting a major speed bump. Car trading platform Cango Inc.’s (CANG) business took a big hit in the second quarter, as China’s car market ground to a near standstill and the company’s headquarters in Shanghai was shuttered along with thousands of other businesses for much of the period. But Cango remained comfortable enough to start putting its cash back into short-term investments, as it continued to roll out some of the final pieces in its transformation to a provider of car-trading services from its older business model as a car financier. Its progress in that transformation was speckled through the company’s second quarter financial report, though a huge drop in its quarterly car transactions and revenue dominated the announcement. The smaller but strategically significant developments were also focal points on its earnings call, whose participants included analysts from Morgan Stanley and Goldman Sachs, showing the company can still attract attention from some of the big-name banks. Like many Chinese companies being pounded by fallout from the country’s strict Covid control measures, Cango also forecast that things were already starting to improve in the current quarter as cities across China began to ease some of their restrictions. Still, the potential for more big disruptions always remains a possibility, as evidenced by new citywide lockdowns this week in the southern boomtown of Shenzhen and in Chengdu, capital of Sichuan province. China’s overall auto market suffered one of its worst quarters in recent memory in the three months through June, with sales down a whopping 48% in April and another 13% in May amid all the Covid controls, including a complete lockdown of Shanghai in April and May. But the market began to pick up in June and July, with car sales posting around 30% year-on-year growth for both months, according to industry data. Cango’s comeback wasn’t quite that strong, though its numbers do show its business bottomed out in the second quarter and has started trending back upwards. Its second quarter revenue tumbled 69% to 289.2 million yuan ($41.7 million) from 946.7 million yuan a year earlier, according to its latest quarterly report released on Monday last week. The company conducted 2,291 car-trading transactions over its platform during the quarter, down from 6,827 on its Haoche miniapp in the previous quarter. New energy vehicles (NEVs), a major focus for its car-trading services, accounted for 1,329 units during the quarter, about 58% of total transactions. The weak numbers bled through to Cango’s bottom line, with the company reporting a non-GAAP adjusted net loss, which excludes certain items like employee stock incentives, of 189.6 mln yuan, widening from a 113.3 million yuan loss in the previous quarter. Cango forecast its revenue would bounce back to between 350 million yuan and 400 million yuan in the current quarter, which would represent about 30% growth from the second quarter low but is still down about 50% from the year-ago level. At least part of the drop owes to the changing business model we’ve already mentioned, which puts far more emphasis on a broader range of car trading services aimed at mid-sized to smaller auto dealers in smaller cities. By comparison, Cango was previously a traditional car financier. That part of the business has been shrinking steadily, and accounted for less than 10% of the company’s business in the second quarter – down sharply from 13% in the previous quarter and 25% in the final quarter of 2021. New investments While the company clearly burned through some cash in the last quarter, it also managed to put around 250 million yuan of its remaining cash into new short-term investments. As a result, its total cash fell to 1.28 billion yuan at the end of June from 2.14 billion three months earlier. Such behavior seems to show the company is relatively confident about where it’s going and isn’t worried about a cash crunch in the near term. Amid all the background noise from the broader economic turmoil, Cango managed to roll out the centerpiece of its new car-trading strategy during the latest quarter with the June launch of its Haoche app, following the launch of its Haoche miniapp on the popular WeChat instant messaging platform last year. It also made some major moves into used cars during the quarter in anticipation of strong growth ahead for that market. “As NEVs and used cars enter a new development stage of fast and large-scale growth and benefit from policy initiatives designed to stimulate market activities, we will make ongoing investments in these two areas to elevate our platform capabilities and realize our goal of building a tech-enabled car trading platform,” said CEO Lin Jiayuan on the company’s earnings call. Company officials said that only two weeks after the Haoche app’s June launch, more than 1,000 dealers had migrated to the app or registered new accounts there. That brought the number of dealers in the broader Haoche ecosystem, which also includes WeChat miniapp users, to 8,237 dealers in 305 cities by the end of June. Company officials added the Haoche app will launch an insurance service interface in the current quarter. Meantime, they also highlighted encouraging results that have seen daily user activity on the Haoche platform rising by nearly 50% on a quarter-to-quarter basis, and dealer activity rising by an even stronger 70% on the same basis, reflecting growing user “stickiness.” At the same time, the company launched a used car platform early in the second quarter, and by the end of June had already signed up 1,500 registered users. It pointed out China’s used car market could be headed for rapid growth soon, following the recent removal of cross-city transfer restrictions on used cars that should pave the way for a western-style national marketplace.

    ID

    US$1.23

    PARTS iD

    7D

    13.9%

    1Y

    -77.2%