Advice: Amazon’s stocks look tired. Consider buying shares of these five fast-growing ecommerce games instead
Jeff Bezos has numerous achievements to his credit, the most recent being his alien excursion.
But Amazon.com AMZN,
shareholders may not be so impressed. Two-way talk about antitrust actions against the e-commerce giant could mean Amazon’s dominance could meet Washington’s challenges. That’s because Bezos handed over the CEO role to Andy Jassy earlier this month.
Shares of Amazon underperformed the tech-heavy Nasdaq 100 NDX,
and the S&P 500 SPX,
in 2021, even as the coronavirus pandemic forced Americans to rely on its service during its darkest days.
Given all of this, it’s worth considering e-commerce alternatives if you’re concerned that Amazon’s best days are behind you.
Here are five smaller high-growth companies you might want to investigate:
Shares of Sea Ltd. SE,
are up about 45% in 2021, reaching new all-time highs as it continues its aggressive growth in Asia and Latin America.
The Singapore-based company has a broad business model that takes advantage of e-commerce and digital retail operations around the world. That includes the Garena digital entertainment platform that publishes video games and offers e-sports tie-ins, the Shopee e-commerce platform and SeaMoney digital financial services, including mobile payment services.
Sea was a darling in 2020 because it brought the “stay-at-home” trade to great success. Revenue doubled year over year in 2020 to $4.4 billion, and the company’s momentum has been the envy of Wall Street, as Sea stock posted about 640% gains in the calendar year.
But the fundamentals Sea showed in 2021 indicate that the rise in stock prices was justified. Recall that in the May first quarter report, sales increased by approximately 150% — while gross profit tripled year over year.
With the next earnings report slated for mid-August, Sea Stock could once again have a head start as it continues to prove Amazon isn’t the only e-commerce name worth checking out.
While Sea has been a cult stock in some circles for a while, one Asian e-commerce stock that still flies under the radar for many is Korea-based Coupang Inc. cng,
South Korea’s largest e-commerce company began trading in March after an IPO that raised $4.6 billion, but its shares have since plummeted — and other cult-like stocks have grabbed all the attention.
If you’ve never heard of Coupang, the model must look familiar to you. It sells a variety of products including household goods, clothing, beauty products, sporting goods, and electronics. It also looks beyond these tried-and-true categories to include a focus on fresh food and groceries, as well as services such as travel and restaurant delivery.
While the fundamentals are light given its recent debut, the numbers we have show this regional e-tailer is connecting widely in Korea. In fact, it saw 74% net sales growth in its May first quarter report, and gross profit increased 70% year-over-year. The total number of customers grew by 21% and revenue per customer increased by 44%.
Admittedly, the total customer base in that quarter was just 16 million households — hardly Amazon-esque. And so far, stock prices have fallen slightly in 2021, although the S&P 500 has surged higher. But remember, this is a company that just raised $4.6 billion — with a “B” — and is serious about growth. Given the language and logistical barriers to competition in the markets it serves, which clearly have long-term growth potential, investors might view the lull in Coupang stocks as a buying opportunity.
MercadoLibre Inc. MELI, a page from the Silicon Valley stock playbook with high stock prices and a refusal to split,
is currently trading well above four digits – and based on recent history, it looks like it will stay there.
MercadoLibre shares have cooled in 2021 and have suffered a slight loss so far, compared to an overall upward trend for US stocks. But that’s after this Latin American stock posted 200% gains last year. Argentina-based MercadoLibre is barely slowing down, though, as reported in the first quarter 70 million active users — an increase of 62% from just over 43 million users in the previous year. Gross trading volume rose even more, growing 77% year-over-year to just over $6 billion, compared to $3.4 billion in the first quarter of 2020.
What’s really exciting for investors, though, is that gains in major e-commerce transactions are being complemented by continued growth in financial services. MercadoLibre reported an impressive $2.9 billion payment volume through its mobile wallet platform, and its Mercado Credito lending platform saw its portfolio grow to $576 million – more than double from the previous year.
Amazon has taught ecommerce companies that dominating all aspects of the consumer experience is how to really build a dominant operation. With MercadoLibre growing in sales but also increasingly connecting to the financial side, it is becoming a force in Latin America – and a real competitor to even deeply rooted Western e-commerce brands.
Newegg Commerce Inc. NEGG,
is a consumer electronics e-tailer that has a bit of following in computer geek circles, but has gone largely unnoticed by most consumers and investors. That is, until it peaked from $10 a share to a brief high above $60 a share in July.
The incendiary incident was news that Newegg would be carrying the hard-to-find Nvidia NVDA,
graphics hardware and therefore theoretically see a large increase in turnover and profit. However, Newegg can prove that it’s much more than just a superficial piggyback game on Nvidia, as it proves that there is real value to specialty stores serving a specific audience – offering high-demand products rather than counterfeit products backed by fraudulent five star reviews.
Newegg went public through a SPAC, so it doesn’t have a lot of history to show investors yet. But the little we know is evidence that Newegg stocks have potential. Consider it an impressive market share when it comes to core hardware items like PC processors, motherboards and the like. It is also in the top five websites worldwide when it comes to computer and electronics selling sites, and is a go-to site for cryptocurrency miners and PC gamers alike.
According to what we know about the financial data, Newegg reached sales of $2.1 billion, thanks to its dominance in this profitable niche of computer components. And as the recent Nvidia score shows, it has deep relationships with consumer electronics suppliers to ensure it’s not just another Amazon clone selling cheap flat screens.
If you’re interested in what life is like for ecommerce outside of Amazon, look no further than Shopify Inc. SHOP,
This Canada-based technology company provides a platform for any business to build out web and mobile storefronts, integrate these operations into brick-and-mortar retail locations, then assist with core inventory, shipping, and payments.
Shopify stocks were one of those names that made a lot of headlines in 2020 as part of the pandemic-related proliferation of social distancing service providers. Shares jumped from about $400 to $1,100 last year as everyone wanted to do business digitally. But in 2021, Shopify inventory is up almost 40% more, showing that this isn’t just a COVID trade. After all, the ecommerce potential it helps merchants realize is real and lasting after the pandemic.
Example: Fiscal revenue growth in the first quarter reported at the end of April was a blazing hot 110%. But what long-term investors will appreciate even more is that the subscription service’s MRR — that is, monthly recurring revenue — has accelerated by 62% year-over-year, proving that much of the initial outlay for building out these platforms is sticking. if customers maintain their Shopify presence.
Shopify isn’t quite Amazon’s scale, but with a market cap of about $200 billion right now with comfortable operating profits to back it up, investors looking to bet on the pitch versus Bezos & Co. do worse than joining Shopify inventory.
Jeff Reeves is a MarketWatch columnist. He does not own any of the securities mentioned in this article.