Why Is Newegg Stock Going Up?

Video games: for older generations, it’s nothing more than a waste of valuable time and energy that should be spent on something productive and enriching. For younger generations, it’s a dream job that they could only imagine doing for a living one day.

Clearly, playing video games continues to be divisive among young and old age groups alike. The popularity of gaming — specifically PC gaming and video game streaming, where viewers can tune in to watch others playing popular games — tells you everything you need to know about which side has the edge in the debate these days.

Another key indicator of how popular PC gaming — and PCs in general — currently is? The value of computer hardware and consumer electronics stock on the New York Stock Exchange. Take Newegg, for example: Its price per share more than doubled in just one week alone. But why exactly is Newegg stock going up, and is it too late for retail investors and traders to buy in?

Newegg IPO Recent But Company Well Established

Founded 20 years ago in 2001, Newegg is an online retailer specializing in computer hardware and software as well as consumer electronics and goods.

Visitors to the site can find anything from gaming accessories to DVDs to household appliances to office furniture — if it has something to do with computers, even if it’s the most rudimentary connection, then it can probably be found on Newegg’s website. With the popularity of homemade PCs and PC gaming and streaming as of late, Newegg’s current success seems totally understandable.

While the company been around for two decades now, Newegg is a fairly new stock on the market. It made its public debut in May of 2021, following a majority stake acquisition by Chinese technology company Liaison Interactive in 2016 and a massive merger agreement with Lianlou Smart Limited in 2020.

Newegg has seen great success so far, with the esteem of its computer products and the allure of its logistics services attracting plenty of retail investors and traders to its young stock.

Newegg Financials Are Topsy Turvy

Of course, Newegg’s success on the stock market isn’t just due to the reputation of the company — Its financials are quite impressive as of late, and the numbers certainly seem to warrant the attention after such a dramatic turnaround for the company.

In 2016, the year of Liaison Interactive’s acquisition, Newegg reported just over $13 million in revenue with a net loss of nearly $10 million. The next year, the numbers looked just as bad: Newegg reported a net loss of $5 million.

From 2017 to 2018, Newegg’s numbers skyrocketed to a revenue of over $2 billion, even though its net loss was all the way up to $53 million.

Newegg financials took a turn in 2019, when Newegg brought in $1.5 billion with a net loss of almost $17 million. The company still wasn’t turning a profit at the end of the year, but the margin was definitely shrinking.

In 2020, Newegg took home its first profit with revenue of $2 billion and a net income of $414 thousand. It might not sound like a lot, but it matters quite a bit. Because of this significant turnaround for Newegg, analysts predict similar numbers when its 2021 fiscal year comes to a close.

Why Is Newegg Stock Going Up?

Newegg stock is going up because, like GameStop (GME) and AMC before it, the computer hardware and consumer electronics company has received the infamous meme stock treatment in July of 2021.

When Newegg went public in May, no one seemed to bat an eye. It hovered around the $10 mark throughout May and June, with very little activity at all for retail investors and traders to notice. Then, on June 30, Newegg stock leaped from $10 a share to almost $20 a share in a single day. Over the next week, Newegg shares reached a price of $67.

If you attempted to pinpoint the exact reason why this happened to Newegg now, it seems to come down to its new availability of option-based trading. As call options are bought in volume, dealers must stay delta neutral. That necessitates going long the stock while simultaneously selling calls to retail trader. In short, massive call buying precipitates massive stock buying.

Is It Too Late to Buy Newegg Stock?

While Newegg stock seems to have peaked the first week of July, there’s still plenty of activity going on with the stock.

Therein lies the issue, though: As with meme stocks of the past, there’s really no way to predict if Newegg stock will shoot back up in a week or a month or a year, simply continue to dip down lower and lower until it stabilizes at its usual $10 mark, or just continue to wobble up and down ad nauseam.

It might be too late to invest wisely, but if you’re willing to take a risk, Newegg stock is currently in a dip.

Newegg Stock Forecast: How High Can It Go?

There’s little doubt Newegg stock will go through some massive highs and some dire lows over the coming months, just like other meme stocks in 2021. As such, Newegg still might have plenty of energy left to go higher. While some analysts won’t even attempt to forecast, others say that Newegg could head back into the $70 range and mellow out in the $50s. Whether this actually happens or not remains to be seen, but either number is higher than its current price per share in the mid $40s and could result in a nice return, even if it might be a minimal one.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.