The e-commerce industry has been one of the major beneficiaries of the COVID-19 pandemic. With the whole world forced to stay at home, people are relying solely on e-commerce platforms for their daily needs. Be it groceries, vegetables, electronics, clothes, or lifestyle products, people are using these platforms for their living needs.
The loss for brick-and-mortar stores has meant gains for e-commerce firms that left no stone unturned to make the most out of the opportunity. From providing delivery within hours of placing an order to offering perishable products, e-commerce firms have it all covered.
What does the future hold for e-commerce stocks?
With the countries around the world witnessing a second wave of the pandemic, e-commerce stocks are expected to post robust performance as people continue staying indoors. As the whole world waits for an effective vaccine, e-commerce stocks are having a heyday.
The pandemic has triggered an online shopping boom which is here to stay. Even when the vaccine is out, people might prefer ordering online because of their changing habits with ease and convenience. A report from German market data provider Statista has said that global e-commerce sales are likely to grow to $6.54 trillion by 2022 from $3.53 trillion in 2019.
Amazon.com Inc. (AMZN) is the market leader in the global e-commerce space benefited the most from the pandemic. AMZN’s stock price has surged 72.4% on a year-to-date basis to close Friday’s trading session at $3,195.34.Quite naturally, at the current price level, everyone can’t afford to buy this stock. However, there are other smaller players like Sea Limited (SE), Vipshop Holdings Limited (VIPS), and Jumia Technologies AG (JMIA) that can help to ride the e-commerce wave pretty successfully. Each of these e-commerce stocks has gained at least 80% year-to-date and holds significant growth potential.
Sea Limited (SE)
Singapore-based SE is an e-commerce and video gaming firm which was established in 2009 and is focused on the Southeast Asian market. Its platform offers digital finance, e-commerce, and digital entertainment services. SE’s financial services unit is called SeaMoney; the e-commerce business is known as Shopee, and the entertainment unit is called Garena.
In the third quarter, SE’s revenue nearly doubled year-over-year to $1.2 billion, as the pandemic increased adoption of its e-commerce services. Shopee’s revenue surged 173.3% to $618.7 million. Gross orders rose 102.7% to 741.6 million as people feared stepping out due to the pandemic. According to US-based app market data provider App Annie, in the third quarter, Shopee was the second most downloaded app across the world within the Shopping category.
Following a strong third quarter, SE has raised its full-year e-commerce sales projection to more than $2.3 billion, up 144.1% year-over-year. This is 31.4% above the midpoint of the earlier announced guidance range of $1.7 billion to $1.8 billion. With an average price target of $195.72, SE has an upside potential of 10.1%.
How does SE stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
B for Peer Grade
A for Industry Rank
A for overall POWR Ratings
It is also ranked #6 out of 59 stocks in the Internet industry.
Vipshop Holdings Limited (VIPS)
China-based VIPS, which was established in 2008, runs an e-commerce website VIP.com offering discount sales. It offers menswear, women’s wear, kids’ wear, cosmetics, sporting goods, handbags, accessories, luxury goods, and home and lifestyle products, among others. For the third quarter ended September 30th, the company’s revenue increased 18.2% year-over-year to CNY 23.2 billion, as people continue shopping online amid a rise in coronavirus cases.
Net income rose 15.2% to CNY 1.4 billion, and total order volume surged 35% to 172.8 million. The number of active customers went up 36% to 43.4 million as more people turned to e-commerce platforms for meeting their daily needs. For the fourth quarter, VIPS expects revenue to rise by 15%-20% year-over-year to the range of CNY 33.7 billion to CNY 35.2 billion.
VIPS’ POWR Ratings reflect this promising outlook. It has an overall rating of “Strong Buy” with an “A” for Trade Grade, Buy & Hold Grade, and Peer Grade and a “B” for Industry Rank. Among the 115 stocks in the China industry, it is ranked #5. The company’s stock has an average price target of $171.26, reflecting an upside potential of 562.5% from its last closing price.
Jumia Technologies AG (JMIA)
Germany-based e-commerce firm JMIA offers payment, shipment, delivery, logistics services, and more. Established in 2012, the company has a market cap of around $3.1 billion. JMIA offers its services in Nigeria, Egypt, Tunisia, Ivory Coast, South Africa, Morocco, Kenya, Uganda, Ghana, Algeria, and Senegal.
JMIA’s total revenue decreased by 17.7% year-over-year to €33.7 million in the third quarter. The fall was the result of a 53% decline in First Party revenue to €9.8 million. The company’s marketplace revenue grew 19% to €23.4 million. The variations in revenue are because of the business mix rebalancing that JMIA initiated in 2019. To break even, it has reduced consumer incentives on lower value business and is instead focusing on daily-use products to boost sales.
JMIA reported a loss of €28 million, compared with a loss of €54.6 million in the third quarter of 2019. The number of active users surged 23% to 6.7 million, driven by the stay-at-home rules and business mix rebalancing. Analysts expect the company to end the fourth quarter with $45.3 million in revenue, as the second wave of the pandemic bounds people at home. Analysts expect revenue to fall 5.6% year-over-year this year but surge 26% next year.
Based on the projections of strong growth next year, JMIA is rated a “Strong Buy” in our POWR Ratings. It holds straight “A” in Trade Grade, Peer Grade, and Industry Rank and a “B” for Buy & Hold Grade.
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AMZN shares were trading at $3,146.76 per share on Monday morning, down $48.58 (-1.52%). Year-to-date, AMZN has gained 70.29%, versus a 13.66% rise in the benchmark S&P 500 index during the same period.
About the Author: Puja Tayal
Puja is a seasoned writer working with financial publishing companies like Motley Fool Canada and Market Realist. With over 13 years of experience in the field of fundamental research, she brings a blend of comprehensive, well-researched insights into her articles. More...
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