The coronavirus pandemic has forced consumer behavior to change rapidly. Government-mandated closures of non-essential businesses, remote working and distance learning have all been major shifts in the way society does things.
The unprecedented changes have created winners and losers among businesses. Those with a robust digital offering experienced strong customer and revenue growth. Among the winners were Chegg (CHGG 2.27%), Skill (SKLZ -5.48%)and eBay (EBAY -1.55%). As economies reopen, consumer behavior is changing again and the aforementioned are experiencing slower revenue growth.
Chegg is an education technology company that primarily serves students. At the start of the pandemic, students were sent home for remote learning. Away from valuable on-campus resources, students turn to Chegg for help with their college program. As a result, revenue growth jumped more than 50% for several quarters.
Interestingly, Chegg’s services are useful for students whether they are taking classes online or in person. Yet when campuses began bringing students back to classrooms, revenue growth slowed dramatically, culminating in a just 2% increase in its last quarter, which ended March 31.
Skillz is a unique gaming company. It allows players to wager real money on games played on its platform. Unsurprisingly, when billions of people were locked up at home during the shutdowns, the demand for home entertainment increased and Skillz benefited.
However, with billions of doses of an effective vaccine being administered around the world, trade restrictions have been lifted in most parts of the world and demand for home entertainment has diminished. Skillz has had a harder time growing revenue despite aggressive marketing investments. In its most recent quarter, which ended March 31, revenue grew only 12%, much slower than the rates shown in the chart above.
eBay needs no introduction. The popular auction and e-commerce site flourished as people sought to avoid in-person shopping. In its quarter that ended in March 2021, revenue soared 42%, topping $3 billion in one quarter for the first time in years.
Like the others mentioned above, eBay’s revenue slowed as economies reopened and consumer behavior was more like pre-pandemic habits. In its most recent quarter, which ended March 31, eBay’s revenue fell 6%.
One last word
Of course, these companies did not expect the pandemic-induced revenue surge to be sustained over the long term. That said, it appears investors were caught off guard by the downturn. Each of these three stocks has seen considerable declines over the past year. Granted, there are other factors at play here, including the Federal Reserve’s monetary policy tightening. But economic reopening is certainly partly to blame.
Investors should keep an eye on these companies and how changing consumer behavior will affect them over the coming quarters. The key question to keep in mind as you watch this is whether they are emerging from the pandemic stronger than they entered. If so, the sale could be an opportunity.
Parkev Tatevosian has positions in Chegg and eBay. The Motley Fool holds positions and recommends Skillz Inc. The Motley Fool recommends Chegg and eBay. The Motley Fool has a disclosure policy.