The e-commerce industry capitalizes on rising internet use for social media, streaming, and shopping. It leverages trends like data management, personalized loyalty programs, subscription models, and AI-driven ad systems to enhance ad effectiveness. These innovations boost efficiency, improve customer experience, and drive growth, creating new business and investment opportunities.
Hence, as e-commerce grows, investors could consider buying solid e-commerce stocks like MercadoLibre, Inc. (MELI), Shopify Inc. (SHOP), and eBay Inc. (EBAY) to capitalize on these online shopping trends.
The high-speed internet has revolutionized global e-commerce. New AI tools like chatbots and headless commerce, along with resale markets and user-generated content, are boosting consumer spending, fueling growth in the internet sector. The number of E-commerce users in the U.S. is projected to increase by 60 million, a 21.94% rise from this year to 2029, reaching 333.50 million users.
Meanwhile, in Q1 2024, adjusted U.S. e-commerce sales increased by 2.1% from the previous quarter to $289.2 billion, comprising 15.9% of total retail sales. Innovations such as AR shopping and blockchain further enhance e-commerce prospects. Global retail e-commerce sales are projected to grow 39% over the coming years, surpassing $8 trillion by 2027.
Furthermore, consumer behavior trends like prioritizing convenience and embracing AI-driven shopping are crucial for e-commerce growth. Smartphones now dominate global e-commerce, accounting for 77% of retail site traffic and two-thirds of online orders in Q1 2024. These trends fuel demand for user-friendly shopping, boosting customer satisfaction and driving substantial growth in online sales.
Considering these conducive trends, let’s examine the fundamentals of the above-mentioned e-commerce stocks.
MercadoLibre, Inc. (MELI)
Headquartered in Montevideo, Uruguay, MELI operates online commerce platforms in Latin America. It operates in two segments: Mercado Libre Marketplace and Mercado Pago FinTech platform. The company offers an automated online marketplace for buying and selling, as well as a financial technology platform for online transactions and payments.
In terms of the trailing-12-month gross profit margin, MELI’s 56.49% is 53.8% higher than the 36.74% industry average. Its 3.62% trailing-12-month Capex / Sales is 18.7% higher than the 3.05% industry average. Also, the stock’s 5.93% trailing-12-month Return on Total Assets is 40.4% higher than the 4.22% industry average.
During the fiscal first quarter that ended March 31, 2024, MELI’s net revenues and financial income increased 36% year-over-year to $4.33 billion. The company’s gross profit rose 25.4% over the prior-year quarter to $2.02 billion.
For the same quarter, its income from operations stood at $528 million, up 26.3% year-over-year. Also, its net income and EPS rose 71.1% and 70.8% from the year-ago value to $344 million and $6.78, respectively.
Street expects MELI’s EPS for the quarter ended June 30, 2024, to increase 59.7% year-over-year to $8.24. Its revenue for the same quarter is expected to grow 37.6% year-over-year to $4.70 billion. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 41.6% to close the last trading session at $1,670.09.
MELI’s POWR Ratings reflect this optimistic outlook. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
MELI has a B grade for Growth, Momentum, Sentiment, and Quality. Within the B-rated Internet industry, it is ranked #28 out of 51 stocks. To see MELI’s ratings for Value and Stability, click here.
Shopify Inc. (SHOP)
SHOP is a commerce company that provides a commerce platform and services in Canada, the United States, Europe, the Middle East, Africa, the Asia-Pacific, Australia, China, and Latin America. The company's platform enables merchants to display, manage, market, and sell their products through various sales channels and manage products and inventory, process orders, and payments.
In terms of its trailing-12-month Return on Total Capital, SHOP’s 3.44% is 20.8% higher than the 2.85% industry average. Likewise, its 10.43% trailing-12-month levered FCF margin is 7.5% higher than the 9.70% industry average. Furthermore, the stock’s 0.67x trailing-12-month asset turnover ratio is 8.07% higher than the 0.62x industry average.
For the first quarter ended March 31, 2024, SHOP’s revenues increased 23.4% year-over-year to $1.86 billion. Its non-GAAP gross profit rose 30.4% over the prior-year quarter to $962 million. SHOP’s adjusted net income and adjusted net income per share attributable to shareholders came in at $256 million and $0.20, representing significant year-over-year increases, respectively.
For the quarter ended June 30, 2024, SHOP’s EPS and revenue are expected to increase 45.3% and 18.6% year-over-year to $0.20 and $2.01 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, SHOP’s stock has gained 19.6% to close the last trading session at $64.81.
SHOP’s bright prospects are reflected in its POWR Ratings. It has an A grade for Growth and a B for Sentiment. SHOP is ranked #19 out of 27 stocks in the Internet – Services industry. To access the additional grades of SHOP for Value, Momentum, Stability, and Quality, click here.
eBay Inc. (EBAY)
EBAY operates marketplace platforms that connect buyers and sellers in the United States and internationally. The company's marketplace platforms include eBay.com and the eBay suite of mobile apps. They enable users to list, buy, and sell various products.
In terms of the trailing-12-month EBIT margin, EBAY’s 21.78% is 181.2% higher than the 7.74% industry average. Its 4.60% trailing-12-month Capex / Sales is 50.6% higher than the 3.05% industry average. Similarly, the stock’s 16.07% trailing-12-month levered FCF margin is 195.7% higher than the 5.43% industry average.
During the fiscal first quarter that ended March 31, 2024, EBAY’s net revenues increased 1.8% year-over-year to $2.56 billion. Its gross profit rose 2.5% year-over-year to $1.86 billion. Also, its non-GAAP net income from continuing operations stood at $648 million and 1.25 per share, up 8% and 12.6% over the prior-year quarter, respectively.
Analysts expect EBAY’s EPS for the quarter ended June 30, 2024, to increase 9% year-over-year to $1.12. Its revenue for the quarter ending September 30, 2024, is expected to grow 1.5% year-over-year to $2.54 billion. It surpassed the Street EPS and revenue estimates in each of the trailing four quarters. Over the past six months, the stock has gained 34.2% to close the last trading session at $54.58.
EBAY’s POWR Ratings reflect its strong fundamentals. It has an overall rating of B, equating to a Buy in our proprietary rating system.
EBAY has an A grade for Quality and a B for Growth and Momentum. It is ranked #6 in the Internet industry. Beyond what we have stated above, we also have given EBAY grades for Value, Stability, and Sentiment. Get all the EBAY’s ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
MELI shares were trading at $1,618.39 per share on Thursday afternoon, down $51.70 (-3.10%). Year-to-date, MELI has gained 2.98%, versus a 16.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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