Big Moves in Small Tech


Lots of attention obviously focuses on the biggest stocks, but results from smaller companies have been arguably better this earnings season. This post will review some of those lesser-known names, especially in the e-commerce space.

A big one is Match (MTCH). The dating service crushed estimates and raising guidance as Tindr expended into foreign markets. Not too long ago, investors worried MTCH would get devoured by Facebook (FB). But the smaller company got the last laugh this earnings season, enjoying its biggest gain ever while FB had its biggest drop.

GrubHub (GRUB), which delivers meals from a wide array of restaurants, has been another huge mover. Results on July 25 shot past estimates as users grew 70 percent. Etsy (ETSY) has a similar concept, uniting countless small vendors with an even larger universe of customers. Better-than-expected results sent it past $50 on Tuesday, after rallying on strong guidance in mid-June.

Match (MTCH) chart with 200-day moving average.

Both GRUB and ETSY have staggered in recent sessions, so traders may want to watch and wait for pullbacks. But it seems like both have established themselves as in the new economy, with millions of users. They could offer trend followers opportunities long into the future.

But wait, there’s more. Ever heard of Carvana (CVNA)? Their app lets customers buy and sell vehicles across the U.S. Shares spiked 10 percent last night on strong revenue. Vending machines for cars? This isn’t your father’s used-car dealership!

Then you have Yelp (YELP). “Second quarter results were once again driven by strong revenue growth in our core advertising business,” CEO Jeremy Stoppelman said. That launched YELP 15 percent higher yesterday afternoon.

The wave of positive results seems to reflect the true digitization of the U.S. economy, 20-25 years after Internet use became widespread. While that may seem like a long time, it’s typical considering how other innovations entered the stock market. The Wright Brothers, for example, made their first flight in 1903 but aircraft-related stocks didn’t go mainstream until the late 1920s and 1930s. Television began in the late 1930s but didn’t really take over media until the early 1960s.

There are obviously many more examples but you get the message: After decades of development e-commerce seems to have entered a golden era. Lessons have been learned and best practices have been developed. This isn’t just speculation or crazy ideas like Investors seeking long-term growth may want to watch as companies continue to emerge in this space.

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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.