E-commerce gained market share through the pandemic.
When it comes to e-commerce, there are three numbers investors need to keep in mind: 12, 17 and 14, says Simeon Hyman, head of the investment strategy group at ProShares. Right before the COVID-19 pandemic started two years ago, he says, “e-commerce penetration was 12% of all U.S. retail sales.” At the peak of the pandemic, that number rose to 17%, and today it’s back down to 14%. But another fact is key, Hyman says: Prior to 2020, e-commerce had been growing steadily at about 1% per year. That means that despite all of the ups and downs of the past two years, overall e-commerce growth is still “right on track,” Hyman says. Not to mention that this burgeoning sector still has plenty of room to run. Here are eight top e-commerce stocks for investors to look at right now.
Amazon.com Inc. (ticker: AMZN)
When it comes to e-commerce, Amazon.com is the world’s 800-pound gorilla. Founded way back in 1994 as an online bookseller, today Amazon is both America’s and the globe’s largest internet retail site. With a market cap of $1.2 trillion, AMZN is the fifth-largest company in the world, and one of only five companies in the world currently worth more than $1 trillion. In fact, Amazon’s biggest U.S. retail competitor is Walmart, which is worth a paltry $329.9 billion in comparison. It’s hard to invest in online retail stocks without having Amazon as a part of your portfolio, Hyman says. “Amazon defines e-commerce,” says Dan Romanoff, equity strategist at Morningstar. He adds that he expects Amazon’s “continued innovation to further define share gains.”
Chewy Inc. (CHWY)
Chewy was founded with the intention of “outcompeting wide-moat Amazon for online preeminence in a category that was rife with inefficiencies,” says Sean Dunlop, equity analyst at Morningstar. That category is pet food and other pet supplies. Now, Chewy’s online retail store offers pet owners about 100,000 different products from 3,000 partner brands. “Chewy has carved out an enduring niche in the pet care space,” Dunlop says, counting more than 20% of pet-owning U.S. households as annual active users, both online and offline. Hyman says Chewy’s automated membership, or autoship, subscription service counts for more than 72% of revenue. Those autoship subscriptions cut down on fulfillment costs compared with Chewy’s large peers, reducing split shipments and making inventory management smoother.
DoorDash Inc. (DASH)
“DoorDash holds the No. 1 position as an online food order aggregator in the U.S.,” beating out both Uber Eats and GrubHub, says Ali Mogharabi, senior equity analyst at Morningstar. That’s an industry that was already worth $189.7 billion in 2021, and is expected to grow at a compound annual growth rate, or CAGR, of 10.8% over the next six years, which would put it at more than $350 billion by 2028. And when you figure DASH’s market cap is currently only $24.2 billion, there appears to be a lot of room for growth for the company. “There’s nothing wrong with food delivery,” says Hyman. “It’s a meaningful position.” Analysts surveyed by rating service Koyfin forecast a roughly 50% return potential over the next 12 months for DASH stock.
Etsy Inc. (ETSY)
Etsy is what’s referred to as a two-sided marketplace. The company uses its online platform to connect buyers and sellers around the world. Etsy has carved out an interesting competitive niche, jockeying for e-commerce wallet share across a variety of verticals “in the long tail of unbranded products,” Dunlop says. He expects Etsy to continue to add unique inventory and expand its suite of seller tools and advertising options. Hyman is also optimistic about Etsy, as the company produced 34.9% revenue growth in fiscal 2021 over the prior year, and it started the first quarter of 2022 with 5.2% revenue growth over last year’s comparable quarter. A consensus of 21 analysts surveyed by Koyfin consider the company an overall “buy.”
Figs Inc. (FIGS)
Another e-commerce stock that Hyman thinks highly of right now is Figs, which is primarily a health care apparel company. This is a very niche market, but the company is currently trading about 56% below its May 2021 initial public offering price as of July 25. That’s despite 59.5% year-over-year revenue growth for 2021 on top of 138.1% revenue growth in 2020. Even during the first quarter of 2022, Figs saw 26.4% year-over-year revenue growth. Eleven Koyfin-surveyed analysts forecast an average 66% return for Figs over the next 12 months and gave the stock an overall “buy” recommendation.
MercadoLibre Inc. (MELI)
If Amazon is the world’s 800-pound gorilla in the e-commerce space, then MercadoLibre is Central and South America’s. The Uruguay-based company has a current market cap of $36.6 billion, placing it solidly among the largest companies based in South America. Dunlop says MercadoLibre “continues to position itself as a one-stop e-commerce solution for Latin American buyers and sellers.” He adds that 97% of the platform’s gross merchandise volume is funneled through proprietary payment rails, giving it a stronghold in the market. Of the 24 analysts surveyed by Koyfin, eight rate the company a “strong buy,” 14 rate it a “buy” and two rate it a “hold.”
Alibaba Group Holding Ltd. (BABA)
Alibaba Group Holding’s stock is down about 15% this year as of July 25, but given the route the markets have taken in 2022, that really isn’t so bad. AMZN is down 27% year to date, by comparison. Although the Chinese government’s actions are a wild card for BABA, it appears that the country’s crackdown on technology companies might finally be loosening up. Obviously, this doesn’t mean everything will be rosy for Chinese tech firms right away, but if you think the Chinese government won’t be able to go any further without undermining its own economy, then you might want to consider a stock like BABA, Hyman says. Of the 44 analysts surveyed by Koyfin, eight rate BABA a “strong buy,” 33 rate it a “buy” and only three rate it a “hold.”
Shutterstock Inc. (SSTK)
Shutterstock is an image provider for websites, books and more, with a solid business model that has helped the company return about 248% since its IPO in 2012. Along the lines of the broader market, SSTK is down so far this year, with a loss of about 47% as of July 25. But some analysts see this decline as a buying opportunity. After all, the S&P 500 has lost about 17% in 2022, and the Dow is down 12%. The four Koyfin analysts who rated the stock recently gave it an overall “strong buy” rating with a 12-month return forecast averaging a whopping 75%.
8 top e-commerce stocks to keep your portfolio humming:
— Amazon.com Inc. (AMZN)
— Chewy Inc. (CHWY)
— DoorDash Inc. (DASH)
— Etsy Inc. (ETSY)
— Figs Inc. (FIGS)
— MercadoLibre Inc. (MELI)
— Alibaba Group Holding Ltd. (BABA)
— Shutterstock Inc. (SSTK)
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Update 07/26/22: This story was previously published at an earlier date and has been updated with new information.