3 We are sorry that e-commerce shares should be sold in May, while it is still possible

For a while between 2020 and 2022, it looked like e-commerce would be the future of how people shop and buy everyday goods. From companies like Amazon (NASDAQ:AMZN) To Costco Wholesale (NASDAQ:COST), personal shopping is a thing of the past. However, in-person shopping has some advantages that e-commerce cannot replace.

Moreover, in the period since the pandemic, the shares of many of the mentioned companies have seen significant corrections. In some cases these corrections were more than justified, but in others they started a trend of discovering just how low some investors were willing to go.

This brings us to the question of which e-commerce stocks to sell to minimize long-term damage to your portfolio. These are three potentially overvalued stocks that may warrant selling down the road to gain a better position.

Shopify (STORE)

Down 20% in the last six months Shopify (NYSE:STORE) had difficulty maintaining profitability in the last fiscal quarter. Losses for the first quarter of 2024 reached $273 million, putting the company’s future as an online e-commerce services provider in doubt.

For Shopify to maintain its position in the market with its current business model, it must continually acquire new customers for its services platform, which has been hit or miss in its pricing since the pandemic-era online shopping boom.

Currently, the company has largely focused on the new Shopify Payments platform as a key contributor to its growth. The service, which aims to simplify online payment confirmations for Shopify store owners, has improved penetration but still does not generate additional revenue because it is a free service.

Moreover, gross margin has declined by a significant 50% year-over-year, and operating costs consume approximately 45% of revenues. Perhaps these numbers indicate Shopify’s upcoming expansion or highlight a difficult business model in terms of operational efficiency. Either way, some analysts agree that the company’s stock is overvalued and should be on the list of e-commerce stocks to sell.

PayPal (PYPL)

It was a turbulent history and the sale of the spin-off company PayPal (NASDAQ:PYPL) to where it is today. While PayPal isn’t going anywhere and remains deeply entrenched as a payments system, it relies heavily on transactions to stay relevant, which could be at risk in the short term.

This makes it one of the better e-commerce companies to sell to be in a better position to re-enter the market.

Year after year, the company successfully increased revenues, and although it was slightly coming down from the highest level caused by the pandemic over the last four years, it may have more room for declines before rebounding. I estimate this is because PayPal relies in part on non-essential online transactions such as purchases and cash exchanges. If the economy worsens, people will likely cut back on unnecessary spending, which could eat into PayPal’s revenue stream.

Etsy (ETSY)

On paper, the concept of an online marketplace dedicated to artisans and custom products seems like a great idea. However, in the case of Etsy (NASDAQ:ETSY), an over-obsession with growth has pushed this concept to its limits, causing it to stray from its original mission of human trafficking.

Like other e-commerce platforms, Etsy boomed during the pandemic as consumers sought comfort through online retail therapy. Fortunately, Etsy’s well-positioned model capitalized on this trend, as its perception as a human-driven craft marketplace attracted isolated people looking for something more meaningful to buy.

However, it appears that Etsy may be too big for its shoes as it struggles to balance the needs of a growing number of sellers with the expectations of online consumers. This is because Etsy has always benefited from its niche as a small-volume sales platform, but its responsibilities to shareholders keep it away from that advantage.

As of the date of publication, Viktor Zarev did not hold (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com Publishing guidelines.