Why Alibaba, MercadoLibre, and Sea Limited Stocks Plunged Tuesday

Shares of $Alibaba(BABA.US)$ slipped as much as 5.8%, while $MercadoLibre(MELI.US)$ and $Sea(SE.US)$ each tumbled as much as 6.7%. When the market closed Tuesday, the stocks were still trading lower, down 5.5%, 5.8%, and 5.1%, respectively.

Despite a thorough search of all the usual sources, there was no company-specific news that could be found to explain the slumping stock prices. This suggests that investors were clearly spooked by the ongoing battle with inflation and how the Federal Reserve Bank will respond to it in the near future.

Federal Reserve Chair Jerome Powell made it clear that inflation was public enemy No. 1 and the Central Bank would use all the tools at its disposal to clamp down on rising prices -- including additional aggressive rate hikes.

Market watchers took this as a clear signal that the Fed would raise interest rates by 0.75% again when it meets next week, which would mark the third consecutive increase of that magnitude in just four months.

E-commerce stocks have already taken it on the chin over the past year. Alibaba and MercadoLibre have each declined 50%, while Sea Limited is down a whopping 83%. However, investors with a long-term outlook should consider the big picture. The global e-commerce market is expected to grow from $3.3 trillion today to $5.4 trillion by 2026. This suggests that the death of online retail has been greatly exaggerated.

Finally, each of these stocks sits at or near all-time low valuations on a forward price-to-sales basis. MercadoLibre, Sea, and Alibaba are currently trading at four, three, and two times forward sales. This creates a compelling opportunity for forward-thinking investors.