From Luiza to PayPal: The trends in technology the pandemic has pretended to accelerate

Hello and welcome to Estrada do Futuro, where we talk weekly about the intersection of investments and technology.

Between 2020 and 2021, if you (like me) are one of the people who thought we were 5 years in 5 months ahead of technology penetration in our daily lives, I’m sorry to inform you: We were wrong.

A few months after the reopening of public economies around the world (China is a notable exception), we are seeing a rebound to average in the most diverse sectors that seemed to have been structurally altered by the pandemic.

From e-commerce to “work from home”, below I show you data on how to do it no change.

E-commerce: What’s Over?

I won’t bore you with arguing about the future of work. I’m sure you know the arguments for and against “home office” and have a personal position on the subject.

but what about E-Commerce?

We all had the idea that over time, e-commerce and companies like luisa magazine And free market In terms of total hash it will only increase.

This is what economists often call secular trends. With the onset of the epidemic, this (and many others) were accelerated.

Overnight, brands that were pushing their entry into the digital channel with their stomachs had to race against time not to lose 100% of their revenue due to store closures.

The most prepared, such as Amazon, Mercado Livre, and Magazine Luiza, encountered the opposite extreme: During some seasons, they all grew at an overwhelming pace.

Even investing huge sums of money in the development of their logistics, basically all of them became profitable, due to the explosion in demand.

However, at the beginning of 2022, “e-commerce” became a taboo topic in investment committees (with the exception of a short position proposal).

Amazon, Magazine Luiza, Sea Limited (the holding company of Shopee) showed significant slowdowns in growth, some at levels lower than in 2019.

In all, e-commerce penetration in relation to the rest of the retail has suffered from what we call mean rebound. And that didn’t just happen with Magazine Luiza and Brazilian online retailers.

In the chart below, the blue line represents an actual US e-commerce penetration; The dotted line is a trend line that follows pre-pandemic data.

Data: US Department of Commerce | Produced by: John Lutigue

Over time, it seems as if nothing happened.

And it wasn’t just Louisa magazine and e-commerce…

Another company that got the “5 years in 5 months” stamp was Docosinfamous for digitizing document signatures.

In DocuSign’s corporate materials, prior to the pandemic, it was read that less than 7% of contracts signed annually around the world are done digitally.

Between 2020 and 2021, DocuSign’s stock rose more than 500% and its quarterly revenue accelerated growth to more than 50%.

But since the middle of last year, both have returned to pre-pandemic levels: revenue growth rate and stock price.

DocuSign Quarterly Growth Rate | Detail: Author | Source: Koyfin

Another symbolic case is OKthe largest independent identity management software (logins) company in the market, with increased commitment and penetration among large companies.

Octa’s share, amid the pandemic boom, has tripled. According to more recent data from a similar site, which measures traffic on Okta’s channels, participation in its products has converged with the rest of the industry, both at levels well below the highs reached in 2021.

Source: Sameweb

Another part with a noticeable slowdown was from financial technology Technology companies operating in the financial sector. This trend is particularly evident in the results PayPalwhose quarterly revenue growth rate in early 2022 was the lowest in 5 years.

PayPal Quarterly Growth Rate | Detail: Author | Source: Koyfin

Overview from the technology sector

In general, the shares of all the companies I mentioned earlier are either below or very close to the levels they were in March 2020.

To them, it’s as if “5 years in 5 months” didn’t exist at all.

PayPal (blue), Okta (purple), DocuSign (orange) and Amazon (yellow) stock performance since March 1, 2020 | Detail: Author | Source: Koyfin

And of course they are not alone. As investors aggressively avoid risk and companies increasingly focus on cash generation, companies are beginning to adjust to the worst.

If growth 12 months ago mattered at any cost, no investor today would care about growth if it wasn’t accompanied by profitability.

Over the next 12 months, as companies adjust to this new dynamic, I believe transformational investment opportunities in technology will simply emerge.

Opportunities to invest in incredible companies, whose secular orientation is still perfectly preserved, but at prices that the pandemic has made us believe we will never see them again.

I’ll talk more about that in the coming weeks,

a hug,

Richard Camargo

Read also:

Leave a Comment